If you made major investment decisions based on the recent debt ceiling debacle, it may not have paid off.
Don’t misunderstand.
Gratuitous spending and out-of-control debt is dangerous.
If you do it as a person the consequences are ugly, and the history of indebted nations does not bode well either.
Careful with the doomerism though.
Last month was the month of “Sell in May and Go Away”. yet the market was up slightly. Furthermore, it was a month of constant news on an ever-approaching debt ceiling limit. However, if you had just looked at the stock indexes on June 1st, after being in the wilderness for the entire month of May, you would hardly notice a market threat.
Remember debt ceilings are always approaching. We’ve done this as a country like 80 times.
(No, I don’t think massive debt is good. I’m just speaking reality.)
Here is more reality: Investors didn’t seem to care much.
The firm DataTrek Research pointed out:
US mutual fund/ETF investors don’t seem to have paid any real attention to the recent US debt ceiling debate. Last week, they bought fixed income products and sold stock funds at almost exactly the same pace as the average of January through April of this year.1
Your feelings and my feelings about what may or may happen don’t always tell the truth.
Data doesn’t lie.
It could all go bad this month though, right? Yes.
We go from Sell in May to June Gloom.
(There is always something).
Maybe headlines broke since I wrote this, and it’s all gone south.
Regardless, the lesson is: beware the tendency toward doomsaying and making investment decisions based on the latest crisis.
Kyla Scanlon, a financial educator, writes,
I’m really fascinated by doomerism - how loud and confidently people will talk about what presumably is the end of their world. I am not sure why there tends to be an undercurrent of “if things collapse, I will be okay because I have gold bars” because if things do end up falling apart, they tend to exist within a state of rubble rather than a state of utility, but alas.2
She goes on to point out how this mindset scratches some very human itches.3
Dommerism is entertaining (news networks and YouTube channels can be built on bad news). (“Are you not entertained?!?”, scream-eth Russell Crowe in Gladiator)
There are cognitive biases and thought patterns that intensify this way of thinking.
It can bring a sense of belonging. It’s great to be with people who think the same way and there can even be an odd sense of pleasure among those that reinforce our deepest fears.
It can coalesce around a leader. Could be a noted hedge fund manager, a President, a spiritual leader, a person with a big following on social networking, etc.
You may be far from this kind of outlook, yet y’all could still use a dose of what I’ve said before—find hope in the worst and prepare for the best.
Hard to say it better than Art Cashin, the Wall Street floor veteran, said it back in 2009:
…you never bet on the end of the world ‘cause that only happens once and something that happens once in infinity is a long shot.4
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Sources:
- Accessed via their Twitter account @DataTrekMB on June 1, 2023 at 8:25am.
- https://kyla.substack.com/p/the-art-of-the-doomer
- Hat tip to Kyla for my riffs on four of her points.
- “A Conversation with Art Cashin, UBS” published on October 22, 2009. Accessed online: https://www.cnbc.com/amp/id/33432400 (June 1, 2023).