SMART MONEY: The Market Crisis that Wasn’t

By Brad Brain

This past weekend President Donald Trump authorized a military strike on Iran. That’s a scary thing to think about. Potentially this gets really bad, really fast.

While this was unfolding, I was at a global financial conference in Miami. I spoke with a colleague from Lebanon. It took her 32 hours to get there because they kept cancelling civilian flights due to nearby missile activity. That put things into perspective for me. It’s easy to forget that we are blessed with many things that people in other parts of the world would envy, such as not waking up each day fearing for our safety.

But this is a money column, so I will stick to what I know. One of the things I know is that the investment markets hate uncertainty. And nothing brings uncertainty like missiles in the Middle East.

Following the U.S. military strikes, all indications were for calamity when the markets reopened on Monday. It looked like we were going to see a sharp selloff in equities on fears of military escalation. Oil prices were poised to spike on expectations of disrupted supply routes through the Strait of Hormuz. That’s a big deal, since that would affect 20 percent of the global oil supply.

As I was thinking about what I was going to write about this week, I started to think about some old columns that I had written in the days following the September 11 attacks. Back then there was serious fear and uncertainty, and I would have written some soothing words about taking a long-term view, don’t try to time the market, blah, blah, blah.

But then a funny thing happened.

Iran did respond to the attack, but in a surprisingly measured way. They targeted a military base, avoided civilian casualties, and the pundits felt this was an indication of a willingness to de-escalate.

Here’s the funny part. When the markets opened on Monday, they did the exact opposite of what was expected. Stocks went up, not down. Oil prices went down, not up. The rationale behind this is that Iran didn’t retaliate as extremely as they could have, which was actually a good thing.

Ironically, this brings us back to the point I was going to make in the first place. Don’t try to time the markets. It’s just not a reliable wealth building strategy.

At this same conference we heard from a speaker whose expertise is in Artificial Intelligence, not investments. She happened to mention that she was looking for her financial advisor to give her an idea where the markets were heading. As a client, she felt that was a reasonable thing for her advisor to deliver.

Yeah, good luck with that.

The unpredictability of short-term events is just too fickle a beast to make reliable, consistent, accurate short-term prophecies for the future, whether that be by human or artificial intelligence. Witness this weekend’s events. On Sunday I would have predicted that the markets would open lower and oil prices would jump. On Monday the opposite happened.

This unpredictability is compounded by the fact that investment markets often are not driven by what actually happens. Rather, they move based on what people think might happen. And those assumptions are often wrong.

Here is another aspect about this illusion that short-term predictions for the future are a realistic expectation. Building your investment philosophy on a faulty premise only leads to stress, worry, and panic.

There are people who will doom scroll financial headlines all day long. It doesn’t make them smarter or better informed. It just makes them anxious.

The overwhelming quantity of information, plus the speed it comes at you, can make someone feel like they are drowning. The good news is that I am going to throw you a life preserver. Here it is.

You don’t need short-term predictions anyway.

Here is the better approach. Build a plan based on your financial goals. Factor in your time horizon, risk tolerance, income needs, and objectives.

And then the hard part. Stick to the plan. Even when the headlines are screaming about the next catastrophe and all you want to do is something, anything, to make things better. When that happens, you stick to the plan.

Investing strategically based on your objectives and with discipline is simple. It is not easy. It takes courage to stay the course when the world feels unstable. But history rewards that discipline. The people who reach their financial goals aren’t the ones who panicked every time a headline broke. They are the ones who understood that the market is a long-term compounding machine that is based on fundamentals, not fear.

Smart money stays focused. Smart money tunes out the noise. Smart money knows that sometimes, the best move is simply no move at all.

Brad Brain, CFP, R.F.P., CLU, CH.F.C., FCSI is a Certified Financial Planner in Fort St. John, BC. This material is prepared for general circulation and may not reflect your individual financial circumstances. Brad can be reached at www.bradbrainfinancial.com.