By Don VandeVanter
Here are some common comments heard from investors lately:
“I’m waiting for the election results.”
“When will the bear market be over?”
“I’m waiting for inflation to get turned around.”
Trying to predict the timing of change in financial markets is a lot like trying to predict the weather. Unfortunately, the results are generally not even as good. Here is some wisdom from God’s Word:
“He who observes the wind will not sow, and he who regards the clouds will not reap. As you do not know the way the spirit comes to the bones in the womb of a woman with child, so you do not know the work of God who makes everything. In the morning, sow your seed, and at evening withhold not your hand, for you do not know which will prosper, this or that, or whether both alike will be good.” Ecclesiastes 11:4-6
God’s wisdom is eternal. We easily recognize that without planting a seed, it will not produce fruit. God does not give the seed to lay around idly. If the farmer waits and worries about the weather and never gets the seed planted in the Spring, there will be no crops to harvest in the Fall. The farmer will not always know when God will provide the rain or the sun to make the crops grow. The farmer’s job is simply to plant the seed and harvest the crop when God provides.
Just as God has given the seed for the farmer, He blesses us with resources and talents to be productive for His kingdom. Jesus condemns the foolish servant who hid his talent in the ground in the parable of the talents recorded in Matthew 25: 14-30, but he blesses the faithful servants who put their talents to work and produced more talents.
Many are letting the seasons of the financial markets worry them to the point of doing nothing with the resources that God has given them. Many individual investors are sitting on cash waiting for “the right time” to invest. In an article by Max Adams published by the Business Insider on October 19, 2022, he states, “There’s a massive amount of cash on the sidelines right now as markets suffer through extreme bouts of volatility and investors remain skittish.” Just as we don’t understand “the work of God who makes everything,” we don’t understand when He will provide the rain or just the right amount of sunshine to make our crops grow. We generally know that if we plant our crops in the Spring, we will reap a harvest in the fall. Sometimes, the crop will be average, sometimes it will be a bust, and sometimes it will be tremendous. The product is determined by God, we are just called to be faithful to plant and harvest.
God calls us to be productive with what He has entrusted us. With our financial resources, that means we can be generous by sharing it with others, or we can invest it to grow more and more, but we shouldn’t let it be idle. For long-term investors, we know the stock markets have produced an average gain of 10% per year since 1980, and bond markets have yielded approximately 5% per year. However, it is rare the market returns are near the average. In the last 40 years, there have been stock market gains of 15% or more in 16 years, and losses in nine of those years. So, volatility is as common as the weather is unpredictable. This year has been the worst bear market since 2008, when the market declined approximately 49% between January 1 and November 20. However, from that day forward, the market increased 20% for the rest of the year. The following year, in 2009, the total return of the S&P 500 was an amazing 23.45%. Even though it took until 2013 for the market to return to the pre-bear market levels, those that were driven out of the market at the climax of the bear run potentially missed out on returns more than 40% over the next 14 months. One interesting fact to know is that, over the last 40 years, the sum of the highest one-day gains in the stock market for each of those years makes up approximately 38% of the total gains for those 40 years.
So, if an investor is fretting about the volatility, and is not invested on the one day of the largest gain for the year, his returns are drastically affected. You never know when God is going to provide the rain. On November 10, 2022, the S&P 500 was up 5.5% for the day. Was that the end of the 2022 bear market? Only time will tell. However, there were a lot of folks sitting on cash that missed the rain God provided.