Damage Has Been Done To The Stock Market…

Damage has been done to the market.

In February this year, two days before the full 10% fall in the S&P500 had taken place I sent out a message to my subscribers saying: everything is going to be okay, but be prepared to read frightening stories of, “this is the big one.”

I would not send out that same “everything is going to be okay” communication today.

Last weeks correction is very different from the one earlier this year.

The context of stock market corrections matter.

And the stock market correction that started last week has a very different context to it than the one that happened eight months ago.

Let me explain why context matters.

Below is a price chart of the S&P500 with dividends reinvested (via ticker symbol SPY) from earlier this year showing that 10% correction.

First, the Jan-Feb correction happened after the market had just went up for two straight years.

And second, that nine-day Jan-Feb 10% correction… there was no “entanglement” with past price. No past reference for the investor’s brain to contemplate.

When you look at the price chart below, just notice that to the left of the price correction was open space. It didn’t contain any past price memory. It was a clean correction.

If you think of price charts like images of mountains and valleys, then you might be able to see the Jan-Feb price correction this year as a mountain top that was clearly way above any other mountain tops.

The January – February mountain top stood by itself, last weeks doesn’t.

I’d consider Jan – Feb’s correction earlier this year a “clean” correction. Again, see the image below to see what I mean by clean (read: one without past price memory).

Stock market Correction - January to February 2018

The correction last week was not clean.

Last week’s price correction was entangled with past price history. Price history that investors remember. And it’s this remembering that creates a different type of correction. A price correction of sideways-emotional-volatility.

Disclaimer: I don’t have a crystal ball. I only have past price to reference. And if price is anything, it’s representative of past investor behavior. So it’s likely this current price correction is going to feel different to investors.

There is a higher likelihood investors will get a 2015 – 2016 stock market correction.

You can see below how the 2015 – 2016 correction was one with past price “entanglement.”

Stock Market Correction, 2015 - 2016

These types of corrections are more dangerous.

These types of corrections attack and scare investors at their core. Price fluctuation scares people because it creates uncertainty.

One week the market is up and the investor is relieved… “maybe I’ll be okay and won’t have to work ten more years…”

And then the following week they are in that deep dark space again, the place where no good happens, where thoughts of the market getting cut in half load up images of them having to cancel their club membership or that trip to go see their kids…or even worse…they’ll have to sell their house and downsize their life.

And then because almost every investor is not equipped with a noise filtration system, they let themselves be attacked by the “pick of the month” newsletter industry, the noise channels, the investment blogs, the tweets, the posts, the articles… which all talk about certain doom. Doom that will almost certainly happen, unless of course, the investor buys the secret stock symbol that will ease all their pain.

And so the scared investor buys, and for a moment, they have hope. Maybe they’ll be okay.

But, part of them knows (at a deep level) something is still wrong. And so the investor’s adrenal glands continue to flood the brain with cortisol (stress hormone).

The investors brain continues to operate with an elevated cortisol level and this can cause real damage.

The above link talks about how elevated cortisol levels can cause real damage to a person’s health. What the article does not talk about is how elevated cortisol levels negatively impacts a person’s portfolio too.

So now the investor’s health AND wealth are getting damaged.  

My message this week is clear.

ONE – Prepare for sideways-ness.

TWO – Get a filter.

And THREE, get perspective.

Do your best to keep things in perspective, here’s a short video that had me laughing out loud.  Here’s a chance to find some levity in this often cynical and divisive world.

Laughing is a great cure for [almost] everything.

And hey, if you’re tired of your life getting hijacked by all the noise, then I have a simple next step. I’ve spent my entire adult life living at the intersection of investing and human behavior and I’ve built an extremely useful HEPA quality noise filtration system for investor’s money and investments.

You can see in this PDF (it will download to your computer’s desktop and is titled, “The Training – RC Peck.PDF”) some of what we cover in my Training. You can see what it is and isn’t. The part about the ‘noise filter’ is mentioned in the guarantee section, its number seven.

This PDF was written for a person that I’ve already talked to, so you will see and notice that language. But the message is clear:

There’s a better way. And you can find it here.

Some of you may be curious and want to speak after reading the downloadable PDF. When you are, the next step is to simply get on my calendar to see if its a fit.

In Your Corner,

RCPeck-Dig Signature.JPG     
RC Peck, CFP

P.S. One of my greatest joys is being with my kids one-on-one to share a new experience. Burgess and I have long agreed to regularly take the kids one-on-one to get a deeper connection where all our attention is just on them. 100% parent to kid attention (read: pure love).

This weekend was one of those joyful moments with one difference.  

Let me explain.

My son, and dad, and myself went zip lining together. Three generations of Peck men (okay… two men and an eleven year old boy) hanging out together.

Though my dad (78 years old) is in great health, how many more outings do I have with him AND my son? How many more “ziplines” do I get to share with these two amazing humans at the same time?

This is how I think. And it’s all positive BECAUSE it keeps my priorities in balance.  

There’s a 67 year difference between my dad’s age and my sons’.

One was born in 1940 when the US was right in the middle of the most damaging war ever, pulling this planet apart. And one born in 2007, the year the iPhone was launched, forever pulling this planet closer together.

And then me, born in the middle of the Vietnam war, a time of great uncertainty. Three Pecks born into different worlds. One planet but different worlds.

We got the luxury of being with each other laughing and zipping through the air at 35 mph over many wires 85 feet above the ground.

The trees would sway and swing and the leave would fall like a light rain whenever one of us took the jump and started our zip.

We’d laugh and notice the leaves starting their fall. All together. Three different worlds combined into one experience.

Life is so precious.

RC (son & father)


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