In 2020, the world faced its worst pandemic in a century, causing stocks to plummet by a third in just over a month. Investors worried, and rightfully so. Fast forward two years later, and inflation soared to a 40-year high, sparking investors to stare bleakly at the wall of worry again. 

Now, the market is hitting all-time highs, but instead of celebrating, investors are wondering if it’s time to sell. With two international wars, persistent inflation, elevated interest rates, and an upcoming presidential election, it’s hard for investors to see sunshine and rainbows.

Evolution & Investing

Investors seem to be amazingly skilled at worrying during market peaks and valleys. If there were a job for Chief Worry Officer, many of us (including yours truly) would be overqualified. Before you beat yourself up, it’s important to remember that it’s human nature.  Our brains are wired for survival, always on the lookout for threats. It’s this instinct that kept your ancestors and mine alive. The problem for us today is that the survival instinct that helped our ancestors avoid being eaten by bears or mountain lions doesn’t help us invest. In fact, it hurts us.

Our tendency to focus on potential problems leads us to worry about the next Fed meeting, ongoing wars, and the upcoming presidential election impacting our investments. That worry makes us think about how we can swerve to avoid the next recession or downturn. Financial media plays into this, using alarming headlines to grab our attention, often at the expense of more worry and our peace of mind. (More on financial media’s exploits in an upcoming blog.)

The bad news is there will always be something to worry about when it comes to our portfolios. That sounds bleak but, but if we can’t change the bad news, we need to change how we react to it. Change requires two important elements: awareness of the problem and deciding to do something about it. We’ve got the awareness part down, so what should we do about it? Here are two suggestions:

Change our Response

I’ve been reading “When Things Fall Apart,” an Oprah favorite that uses Buddhist teaching to deliver a master class on what to do when life turns frightening, painful, and totally messed up. The book’s lessons for life can easily be applied to our experience through the peaks and valleys of investing. 

Instead of running away from the worries that make us anxious and afraid to invest, we can learn to accept them as part of the investing experience and the price of admission for investing. By sitting with our worries and experiencing them without resistance (avoiding the “this shouldn’t be happening” mindset), it’s then and only then that they lose their power over us.

Focus on the Forest, Not the Trees

Yes, there will always be something to worry about it in investing. Want some good news? The stock market has tremendous pole-vaulting skills and, historically, has managed to climb the “wall of worry” three out of every four years. Let’s look at the walls of worry over the past five years and how the stock market fared. 

2019 Wall of Worry: U.S./China relations, tariff and trade issues, Brexit → stocks up 29% 

2020: Covid pandemic, U.S. presidential elections → stocks up 16%

2021: High valuations, Covid variants, inflation concerns → stocks up 27%

2022: Ukraine/Russia War, Inflation hits four-decade high, China & Middle East geopolitical concerns, U.S. Mid-Term elections → stocks down 19%

2023: Inflation, Recession fears, Russia/Ukraine war, Fed rate hikes, bank failures, debt ceiling standoff, U.S. debt downgrade → stocks up 24%

Every year brings new worries for investors. The “wall of worry” for investors never goes away; the names on the wall just change. Yet, the stock market has shown amazing resilience in navigating those worries and finishing positively in most years, as the chart below illustrates.

Source: JP Morgan, Guide to the Markets

Despite the major investor worries in the past 5 years, stocks have returned an astounding 15% per year on average. If you could travel back to December 2018 and see the challenges investors would face over the next five years, who would predict stocks would average 15% per year from 2019 to 2023? Not this guy, that’s for sure. For this reason, investors would be well served to look past the “worry” trees and focus on a bustling investing forest that has historically produced positive growth in three out of every four years. 

The list of market worries in the recent past is a reminder that the wall of worry will always be standing in front of investors. Investing at market lows is hard, and so is investing at all-time highs. Now that we’re aware of the challenge, we can choose our response. The key for investors isn’t waiting for the wall of worry to disappear but accepting that it will always be there. How we let it affect us and our investments is up to us. Choose wisely.

***A huge shoutout to everyone who’s sent me their love for the blog – you’re the best! 🎉 If you’re digging the content, don’t keep it to yourself! Please share the wealth with friends and family who would value it. My goal is to make investing easy and fun for all so you can crush your financial goals and live your best life. Thanks for being awesome and spreading the word!***

Castle Quote: “My rule — and it’s good only about 99% of the time, so I have to be careful here — when these crises come along, the best rule you can possibly follow is NOT ‘Don’t stand there, do something,’ but ‘Don’t do something, stand there!’” — Jack Bogle, founder of Vanguard