I wasn’t planning to write anything today, but I see a lot of negative commentary about a pretty positive employment report. And it got me thinking about how people seem to hate good financial news. Now, of course there are the permabulls, who seem to always think everything is great (usually because their business requires them to be biased), but I see a lot more people who just generally despise good financial news.
I don’t have the best answer in the world for this phenomenon, but I think I have a decent one. The short answer is, people hate feeling like they’re falling behind. You see, when everything around you is getting better and you don’t directly benefit from it you feel like the world is closing in on you. The “Joneses” are closing the gap on you. Or you feel like you’re not keeping up. As a species, we’re obsessed with making progress. And when we see signs that those around us are making progress it makes us feel like we’re falling behind.
The same sort of thinking applies to stock prices. Whenever someone sells a stock that goes up there is an opportunity cost involved that someone else is potentially benefiting from. You feel like you’re falling behind. That’s why we see a lot of negativity from certain people when stock prices rise. Odds are, they’re not involved. But this sort of thinking can be really destructive (especially in the market). It’s what leads people to believe they need to chase the market, make irrational decisions, take more risk, “double down”, etc.
But hey, it’s not as bad as you think. Odds are this thinking is the result of your built-in need to make progress. It’s only damaging if you let it defeat you (as in, you stop progressing) or worse, you make silly decisions chasing the people who appear to be surging to the top. Feeling the pressure to “keep up with the Joneses” isn’t necessarily a bad thing. But it shouldn’t guide how you go about your business and your life.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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