Four Words to Address Any Crisis

By Paul A. Ruedi

Over the past few weeks the financial media once again stirred investor emotions with an onslaught of startling headlines about the Iran war. Though the market has only barely declined into correction territory, the past few weeks have represented a miniature version of what investors go through any time they face a crisis. When crisis occurs, investors generally let four words dominate their minds; which four words they choose can have a big impact on their experience.

The four words many are tempted to dwell on is “this time is different.” Though by definition this time is always different, the phrase begins to take on a different meaning: the world (and thus my stock portfolio) will not come back from this one. In this way, the thought that “this time is different” can lead investors astray and cause them to abandon their investments at the worst possible time.

But stocks always have to climb a wall of worry. After several decades in this business I honestly can’t remember a time when people weren’t fearful of something. So when crisis after crisis inevitably arises, I suggest investors try four different words: “this too shall pass.” This is not blind optimism, just a recognition that despite every crisis along the way, the world always healed and moved on. Of course wars, financial crises, and global pandemics are scary at the time. But they always pass. Life goes on, and investors who had the discipline to stick with their investments during the tough times were handsomely rewarded.

We have gone a long time without any meaningful decline in the stock market. This can often cause investors to get complacent which in turn makes any normal decline feel much more like a crisis. I suppose I should have waited for a more serious crisis for a “this too shall pass” column. But I think we should take lessons when we get them, and the past couple several weeks were enough to provide some important lessons. When the market faces adversity in the future, as it inevitably will, investors will once again be tested. At that point though they will be tempted to think “this time is different.” They should instead focus on the fact that “this too shall pass.”

Paul Ruedi is the CEO of Ruedi Wealth Management in Champaign, Illinois.