Would It Help?

If you are a movie enthusiast, you may have enjoyed 2015’s Bridge of Spies, a Spielberg/Hanks historical drama set in 1957. Hanks plays Ray Donovan, a New York insurance lawyer asked by the government to provide a pro bono defense for Rudolf Abel. Abel is accused and convicted of spying for Russia in the midst of the Cold War. (Spoiler alert – if you intend to see the movie, you may want to skip the first two paragraphs). Donovan’s argument before the Supreme Court saves the spy from the death penalty. The CIA then becomes involved and Donovan finds himself in a tense negotiation in East Berlin with the Soviets for a prisoner swap. (A bit more exciting than his normal insurance practice!).

The Russian spy was especially calm throughout his capture, trial, and subsequent exchange into the hands of the Russians who were none too pleased that he was caught. I cannot imagine what awaited him in Russia. When asked on several occasions if he was alarmed, or if he ever worried, his response was a consistent, “Would it help?”, a simple but powerful response.

I think about this as it relates to the ups and downs of the market. We all occasionally suffer from strong reactions to market downturns. Some of us cope better than others, but it does not feel good to see the value of your account drop. After all, the timing of a bounce back is unpredictable. Frustration and genuine fear are common and painful reactions.

Would it help to listen more to the financial news when the market begins a downturn? Would that help us figure out what to do? Knowledge is power, right?   Unfortunately, much of what you hear is a dramatic sound bite or personal opinions regarding an uncertain future. Add the presidential election rhetoric and the drop in price of oil, and you can quickly become pretty depressed about the state of economic affairs in our country and around the world. This commentary is rarely useful for long-term investors or anyone with a well-diversified strategy. Bottom line – the noise doesn’t help.

Would it help to take action – believing that action is always better than staying still? Makes you feel more in control? Change up your investments so it doesn’t happen again? For instance, would it help to move to cash, recognizing that timing when to get back in to the market is a losing game? It is a likely prediction that the market will rebound before you are back in.

If your risk tolerance has changed due to your age or financial circumstances, then this should be fully considered. Otherwise, making a change in a downturn is rarely a smart move.

Staying the course is not indicative of not knowing what to do. Staying the course is a deliberate choice, which has proven to be successful when you have a well-developed long-term strategy.  Despite that, staying the course is oftentimes the hardest choice of all.

As I write this, the market has rallied and erased the losses from the first two months of the year. Now the commentary suggests that it won’t last. We should brace ourselves for a very volatile year. Nothing is right in the world. but then again it never is.

As for me, I am prepared to stay the course, focus on the long-term strategy, and put the ups and downs into a balanced perspective. And that, my friends, is what I believe will help.

Suzanne T. Mestayer