IN YOUR GUTS YOU KNOW YOU'RE NUTS:

Let's get a bit technical for a minute and look at the correlation between stock market performance (the percentage returns in bright blue below) and consumer sentiment, which is an economic indicator that measures how people are feeling about their finances and the state of the economy. This is a chart JP Morgan publishes regularly and I think it's great for demonstrating that how we feel is not very good at predicting how the stock market will do. 

Those little blue dots reflect the highest and lowest points in sentiment and the percentage shows how the stock market did for the next 12 months. Last spring and summer, as interest rates were rising and some tech companies started rounds of layoffs and everybody was sure there would be a recession, the consumer sentiment indicator ("how optimistic do you feel?") was the lowest it had been since the early 1980's. We were worried and depressed and our guts were probably telling us to hide.  

But the S&P 500, which tracks the 500 biggest companies in the U.S., was up over 17% in the 12 month period from June 2022. Our (collective) guts were clueless.

What's my point? Well, I mean, nothing new really. The news of the last few weeks has been miserable. Politics are a mess (that's not news) and a lot of truly grim social chaos is happening around the world. The stock market is in a correction (down 10% from its peak) and there is plenty of data to suggest it could go down more. Our economy is very strong but the headlines all seem relentlessly bad. And no matter how any of this makes you feel, none of it should necessarily change what you're doing.

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