So, What Were You Worried About?

An interesting milestone passed quietly last week.

We’re not supposed to worry about material things. Somehow, we are meant to rise above the earthly stuff.

It’s good when it happens. We get a glimpse of our higher selves, where worry is banished and peace seeps in. But it’s hard to do 24/7. In difficult times we forget that we got through it okay last time. Instead, we think it’ll get worse.

Like most predictions, that’s often wrong – especially when it comes to things that impact on our temporal wellbeing, like stock markets, property prices and economic cycles. In fact, there’s plenty of evidence why we should let go of worry when it comes to material stuff.

Research shows more than 70% of expert predictions are wrong. Most of yours are too. Often, no one predicts anything. I don’t remember anyone saying Vladimir Putin would invade the Crimea, even up to the day before he did. Now everyone seems to think we should have seen it coming.

Life after death

While all that was happening, nobody noticed Thursday, 6^th March 2014. That marked the five-year anniversary of the day global markets plunged to their lowest levels since the financial crisis began.

If you had read the news on 7^th March 2009, you heard it was not going to get better. Your house was now worth less than your mortgage, your retirement fund had collapsed, the EU was disintegrating and you had better sell all remaining stock and bonds. Under the mattress was the only safe option.

As it turned out, it was over. Stocks rallied thereafter. In the US market, to take one example, the S&P500 (see chart below) rose almost non-stop for five years to close last week at an all time high. It’s up 174% since 6^th March 2009, the day when life as we knew it was meant to be over. Most markets have followed suit. It turns out we needn’t have worried after all.

Volatile events are beyond our control. Rather than worry about them, we can only take action and respond.

What can you control?

In business, you can focus on your people, your customers and your processes. Getting them right optimizes your performance whatever the conditions. You have a chance of surviving while marginal players are eliminated.

You can also control your strategy. Today, constant change is almost an essential. Stay flexible. Don’t stick rigidly to your business model, and don’t put it all on black  – especially if it’s an investment strategy. Keep some alternatives ticking over. If what you normally do isn’t kicking goals, what else can you do with what you’ve got?

Here’s another recently updated chart that might post a five-year anniversary this year.

It’s from Bill McBride (calculatedriskblog.com) and shows job losses in the US in the ten recessions since WWII. The red line is the current one. It’s much the same as the stock market. It shows the economy shed jobs for the first two years of the financial crisis. Then, apart from a technical hiccup, it’s been adding jobs non-stop for the

last 50 months. They could be back to pre-recession levels this year.

So try enjoying the recovery. Just don’t bet the farm on it. Downturns tend to happen every six or so years and this upturn has already been underway for five years. Take out a little insurance. Spend more time fine-tuning your strategy and less time worrying about whether it will work.