A couple months ago, we argued in this newsletter that greed was just as scary in the market as fear. The market that month had gone way up without a rational reason. Now we come to this month.
In the last week, the Dow has gone down over 1300 points. The reason is the emergence of the new COVID-19 variant Omicron and peoples’ subsequent fears about it. In response to that fear people are selling off stock thinking the world is going to crash. That response is not rational for several reasons. 1) There have been very few cases so far and thus currently does not have an effect on the global economy. 2) The symptoms are mild. 3) Even if the variant turns out to be a major problem for the world, the economy will survive. When the COVID-19 pandemic first started, the economy crashed hard. However, it quickly bounced back as businesses adapted and thrived. Whatever damage this new variant does to the world, we have full faith that the economic damage is temporary. People are afraid because they are envisioning an unrealistic nightmare scenario that likely will never happen. But, most importantly to our point, they are running away without knowing anything.
While it is important to be careful and stay safe, it is important not to let fear control you. The world has experienced many disasters in the past and economically has recovered from every single one of them. In this case, fear is counterproductive as it is hurting you financially. Eventually the stock market will recover. It may be next week, next month, etc. but it eventually will and when it does you want to be invested. You might be thinking that you will wait until right before the recovery but the problem with that idea is that these things are impossible to time and you are likely going to be late and miss out on a lot of money. Be patient and stay invested. You might lose money in the short term but in the long term you are very likely going to make a lot of money.
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Daniel and Eli
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