by Jason Bodner
May 29, 2024
I used to worry all the time about everything: about my kids, my money, if the dog looked sick, the environment, world war, disease, interest rates and, of course, the stock market.
It was exhausting.
I used to worry, but I don’t worry anymore. It took work, but I just stopped worrying.
How did that happen? Let me explain…
I analyzed my time wasted in worrying. What was I really trying to accomplish? It’s human nature to want to control everything we can. It’s our attempt to tame uncertainty. On the good side, it gives us the illusion of control. On the bad side, we are wasting very precious time.
The average lifespan of an adult male is around 77.5 years. Breaking down our days, studies show that the average amount of free time we have (not devoted to work, chores, or sleep) is about five hours a day. Put another way, only 20% of our lives is really “free” time.
Here’s where science reveals how we hurt ourselves: According to a 2019 Penn State study, 91% of our worries don’t happen. This was corroborated by a Cornell University study that found the number to be 85%. Let’s take the midpoint and say that 88% of what we worry about doesn’t happen, so when we worry about things we can’t control, we are wasting 88% of our time.
Fear and anxiety can be very destructive in the short-term. But the fact that’s it’s 88% unfounded (give or take 3%) can be visualized with a simple chart of stocks for the last 100 years.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
That chart looks fairly tame, since it is based on logarithmic units of 10, but if we remove the logarithmic scale, we see that growth started to skyrocket in the early 1980s:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Interestingly, this was in no small part due to ERISA. The Employee Retirement Income Security Act of 1974 (ERISA), which paved the way for privately directed pension plans via IRAs and 401(k)s. In other words, there is a constant bid for stocks. The wind is at our collective backs.
Naturally, this doesn’t mean that we won’t have bumps and bruises along the way, as in 1987 (now invisible on both charts), or 2001 and 2008. But in our everyday lives, if we worry so much about the bumps and bruises that come with living, we might miss out on the living part.
When it comes to our investments, when things get bumpy, hindsight usually tells us that it’s best to do nothing. Those recent valleys in the chart above are 9/11 and the Great Financial Crisis. (Those charts are not updated for COVID, but since that passed even more quickly than 2008-2009).
During May, Wall Street sputtered to new highs on a new wall of worry. Anxiety over interest rates, inflation, and when (not whether) the Fed will cut rates caused a stomach-churning month for stocks. It’s enough to keep you up at night and keep a fresh bottle of Pepto-Bismol at hand.
But ask yourself this: Will worrying help us if it caused us to bail out and then we see a three-month market surge, or a very strong year? Philosophy is nice, but we are market scientists here, and the data is conclusive: Stop worrying, it’s bad for your personal and financial health.
Last week I pointed out that money flows had bottomed out and started moving into stocks. This “cup” pattern (a “U” pattern) has now made its third appearance in the last year:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
When I dug into the data behind this, I found some very promising results. This is the daily Big Money Index (BMI) starting on April 1st. You can see many consecutive days of falling in the third column, coinciding with the trading days in April, then a run of rising days, May 6 to 23:
Source: Mapsignals
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The BMI fell for 10 consecutive trading days, April 10-26. I looked for similar times. There were 737 days since 1990, or 8.5% of all trading days. These were the forward returns of the S&P 500 after 10 consecutive days of a falling BMI:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
You should know that despite this being relatively rare, at 8.5% of the time, it happened every year since 1990. Sometimes multiple times in a year, but always at least once. So why worry?
Because we always worry. That’s the nature of traders. For instance, last Wednesday, bellwether stock NVDA reported beating earnings and sales expectations and cited insatiable demand. The outcome was once again better than expected, which should have lifted the market. Initially it did, but then the market turned ugly.
So, we could worry about that. We could also worry that the BMI rose for seven consecutive trading days, May 15-23. If markets rise when the BMI falls 10 days in a row, shouldn’t we worry?
Never fear, I looked at that, too. The BMI rose seven or more consecutive trading days 3,640 times since 1990. This is far more common, 42.5% of the time. Here are the forward returns:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Those are lower returns than the falling BMI returns listed above, but still pretty rosy returns.
You tell me now: Should we worry? I think not.
I see other reasons not to worry when we look at sectors. Below, we see the sector ranks from May 1st on the left and May 23rd on the right. Notice that Technology has powered six slots higher on the list in the last three weeks. That’s a meteoric rise. I find this reason enough for cheer because bull markets are at their strongest when led by growth sectors.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Next, let’s look at the buying and selling in the top three and bottom three sectors:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Technology is clearly gaining strength. Industrials and Energy see no real signs of selling to fret over.
Now for the bottom three:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Even though they are basement dwellers, I see no reason for worry. The most recent Health Care selling spike was led by only 21 stocks.
So, earnings season has concluded. This would be a normal time to expect volatility. (“When the cat’s away the mice will play.”) But seasonality paints a different picture. May has lived up to expectations (April did not). June historically is mixed, while July is strong:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
For me, the easiest way to avoid worrying about markets is to focus on finding the best quality stocks. The data says everything else has a way of working itself out. So, stop worrying. Time can be wasted, but never bought back, so spend your time doing something that brings you joy and peace. And remember:
“If you see ten troubles coming down the road, you can be sure that nine will run into the ditch before they reach you.” – Calvin Coolidge (U.S. President from 1923 to 1929)
Navellier & Associates owns Nvidia Corp (NVDA), in managed accounts. Jason Bodner owns Nvidia Corp (NVDA) in a personal account.
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
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Income Mail by Bryan Perry
How to Add Premium Income from Selling Covered-Calls in Big Cap AI Stocks
Growth Mail by Gary Alexander
Remembering Our Dark Summers 50 and 100 Years Ago
Global Mail by Ivan Martchev
The Stock Market is Channeling Yogi Berra
Sector Spotlight by Jason Bodner
Don’t Worry: Be Healthy, Happy (and Richer)
View Full Archive
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Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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Jason Bodner is a co-founder and co-owner of Mapsignals. Mr. Bodner is an independent contractor who is occasionally hired by Navellier & Associates to write an article and or provide opinions for possible use in articles that appear in Navellier & Associates weekly Market Mail. Mr. Bodner is not employed or affiliated with Louis Navellier, Navellier & Associates, Inc., or any other Navellier owned entity. The opinions and statements made here are those of Mr. Bodner and not necessarily those of any other persons or entities. This is not an endorsement, or solicitation or testimonial or investment advice regarding the BMI Index or any statements or recommendations or analysis in the article or the BMI Index or Mapsignals or its products or strategies.
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