Maybe it’s fight or flight but when times are good people tend to worry about the next downturn.  When times are bad people tend to worry it can only get worse.  It’s why those preaching negativity sound astute whereas those being pragmatic or positive sound out of touch with reality.

Consider the economy and its somewhat derivative financial markets.  Ask the average person today where things are headed and they’ll paint a gloomy picture:

  • there’s too much corporate debt
  • there’s too much government debt
  • there’s too much student debt
  • a second wave of COVID-19 is coming
  • day traders buying stock in bankrupt companies (e.g. Hertz) are being rewarded for their stupidity
  • owners of real estate will go under as businesses and households can’t pay the rent
  • corporate pensions are underfunded
  • Uncle Sam can’t print money forever
  • state/local governments will cut back on services due to tax revenue shortfalls
  • the Fed will raise interest rates
  • tax rates are headed higher

It’s not an exhaustive list by far.  Surely we all have a favorite excuse to add.

What about buying?  Ask that same average person today to make a case for an improving economy and/or financial markets and you’ll get the following:

  • huh?
  • what?
  • what was that?

Sadly it’s not a joke.  Equally as sad is that a lack of reasons to be positive isn’t unique to 2020.  And yet the chart looks like this:

 

Behavioral theory tells us about loss aversion – that losing $1 hurts more earning $1.  That’s why we seek out negative information.  We want to know what can go wrong more than we focus on what can go right.

What does the future hold?  Unclear . . . but surely we’ll come up with reasons why it’s going to get worse.