Groundhog Day is a hilarious movie starring Bill Murray, Andie McDowell and Chris Elliott. Phil, Bill Murray, is sent to Punxsutawney, Pennsylvania to report on the city’s famous groundhog to see if winter will continue for six more weeks. Bill Murray’s character is stuck repeating this day and wakes up each morning to I Got You Babe by Sonny and Cher. When Phil realizes what’s happening he takes his life to extremes by over eating, jumping from buildings, sitting in the bathtub with a toaster, leaping in front of a moving truck and hitting people (Ned) in the face. No matter what he does he wakes up each morning as if nothing happened.
The stock market is like Groundhog Day. Each day reporters cover the actions of the stock market hunting for clues as to what the future may bring. If the market is rising, reporters want to know if this is the beginning of a new bull market. Will the stock market “breakout” and bound forever upward or is this a trap to get the individual investor to buy at the market top? Likewise, if the market is falling, the media will look for a fearmonger to report on the end of times. The market is falling so we must be standing on the precipice about to plunge into the abyss.
CNBC parades an army of analysts, fund managers, experts, academics, gurus and other fortune tellers to try and explain each tick in the market. Guests are given 30 seconds to explain the market’s movements while giving the viewer hope they know what will happen to stocks for the next five decades. The guests usually appear as part of a panel so there are various opinions. The guests battle each other trying to prove their point while the anchor is yelling at them to stop so CNBC can pivot to a “breaking news” story about the changing wind patterns in Eastern China or some other fascinating narrative.
The process repeats itself every Monday through Friday, a financial Groundhog Day. Each day the market will rise and fall. Does it matter what happens to the daily movements of your stocks? It does not, because, in the end the stock market always wins. In a recent chart and article posted by Market Watch, they highlighted the history of the Dow Jones Industrial Average from 1896 to 2016, a 120 years of market data. The chart subtitle is, “Human Innovation Always Trumps Fear.” Despite world wars, a depression, Black Monday, Black Tuesday, Pearl Harbor, Sputnik, the JFK assassination and the Great Recession the stock market has always recovered!
How can you avoid your financial Groundhog Day?
- Turn off your TV and enjoy life. The stock market will be there tomorrow.
- Don’t worry about daily movements in the stock market. Have faith in capitalism because great companies win in the end.
- Focus on your short and long term financial goals. You can’t control the stock market but you can control your financial plan. It’s more important to spend time refining your goals than it is to try and find the next hot stock.
- Diversify your investment holdings to reduce your portfolio risk. A well-constructed portfolio of stocks, bonds and cash will, or should, keep you invested in good times and bad.
- Extend your investment time horizon to avoid short-term ripples in the stock market. From 1926 to 2014 there have been seventy twenty-year rolling periods where stocks have made money 100% of the time.
It’s easy to get sucked into the whirlpool of a financial Groundhog Day so you must be diligent in focusing on your goals. The simple act of thinking about generational wealth will keep you moving forward towards your goals.
Turn your face to the sun and the shadows fall behind you. ~ Maori Proverb
Bill Parrott is the President and CEO of Parrott Wealth Management. For more information on financial planning and investment management, please visit www.parrottwealth.com.
June 24, 2017
Note: Past performance does not guarantee future results. Your results may differ than those posted in this blog.
 http://www.marketwatch.com/story/the-dows-tumultuous-120-year-history-in-one-chart-2017-03-23?link=sfmw_fb, by Sue Chang, Markets Reporter, June 23, 2017.
 Ibbotson®SBBI® 2015 Classic Year Book, Market Results for Stocks, Bonds, Bills and Inflation 1926-2014.