Today is July 4th in the United States. Otherwise known as the worst day of the year for dogs. The loud noises from fireworks can serve as a stress trigger for dogs. Evolution didn’t provide dogs with the ability to distinguish the loud, odd noises from fireworks from other threats. No wonder dogs seek out their owners as safe havens on Independence Day.
Fireworks to a dog is not all the dissimilar to the stock market to us humans. There is a lot of noise, lights and reactions that we don’t altogether understand. (The big difference is that the stock market, to the best of my knowledge, does not smell like sulfur!) Maybe that is why for centuries market participants have tried to anthropomorphize the stock market to, in part, make it is more understandable.
The terms bear and bear, to describe market conditions, came into common usage in the early 18th century. Interestingly the term bear came into being prior to the term bear. From Merriam-Webster:
Etymologists point to a proverb warning that it is not wise “to sell the bear’s skin before one has caught the bear.” By the eighteenth century, the term bearskin was being used in the phrase “to sell (or buy) the bearskin” and in the name “bearskin jobber,” referring to one selling the “bearskin.” Bearskin was quickly shortened to bear, which was applied to stock that was being sold by a speculator and the speculator selling stock.
Even today we want to imbue the market with feeling and emotions. The widely followed VIX Index ($VIX) is described as a ‘fear gauge.’ There are a number of measures that seek to quantify ‘investor sentiment’ like the AAII Sentiment Survey. CNN Money even has a ‘Fear and Greed Index’ that tries to answer the question: “What emotion is driving the market now?” Trying to gauge the emotions of the market is impossible, just as impossible as trying to write market reports that capture the reason(s) behind daily and intra-daily market moves.
If markets can’t have emotions, only individuals can have emotions. If markets can’t have emotions then it stands to reason that society as a whole can’t have a predominant emotional state either. Alex Williams in the NYTimes in a recent article both recognizes this fact and works to subvert it as well. He writes:
While to epidemiologists both disorders [depression and anxiety] are medical conditions, anxiety is starting to seem like a sociological condition, too: a shared cultural experience that feeds on alarmist CNN graphics and metastasizes through social media. As depression was to the 1990s — summoned forth by Kurt Cobain, “Listening to Prozac,” Seattle fog and Temple of the Dog dirges on MTV, viewed from under a flannel blanket — so it seems we have entered a new Age of Anxiety. Monitoring our heart rates. Swiping ceaselessly at our iPhones. Filling meditation studios in an effort to calm our racing thoughts.
It useful to define some terms. Fear is different from anxiety. Anxiety is different from depression but the two are often concomitant.* From the DSM:
Anxiety disorders include disorders that share features of excessive fear and anxiety and related behavioral disturbances. Fear is the emotional response to real or perceived imminent threat, whereas anxiety is anticipation of future threat. Obviously, these two states overlap, but they also differ, with fear more often associated with surges of autonomic arousal necessary for fight or flight, thoughts of immediate danger, and escape behaviors, and anxiety more often associated with muscle tension and vigilance in preparation for future danger and cautious or avoidant behaviors. Sometimes the level of fear or anxiety is reduced by pervasive avoidance behaviors. Panic attacks feature prominently within the anxiety disorders as a particular type of fear response. Panic attacks are not limited to anxiety disorders but rather can be seen in other mental disorders as well.
Two points. One is that these definitions make it clear that fear and anxiety cannot rightfully describe the emotional state of the market or society-at-large. Second it is also the case that fear is unavoidable. While we no longer live in a world with actual, daily physical threats we are still conditioned to fear certain things, like spiders and snakes. So fear, like stress, is unavoidable.
One could argue that stress is a key component in driving us to take action, create and achieve. Morgan Housel at the Collaborative Fund writes:
Stress was a barometer for pushing people toward the things that ultimately made them productive and happy. A tough project at work brings stress, but also a sense of accomplishment when it’s finished. Raising kids is stressful, but being a parent brings meaning.
Stress focuses your attention in ways good times can’t. It kills procrastination and indecision, taking what you need to get done and shoving it so close to your face that you have no choice but pursue it, right now and to the best of your ability.
Stress is a necessary component in us becoming productive and happy. By necessity we need to come to terms with a small amount of stress to avoid the debilitating effects of fear and anxiety. The question is how best can we do this?
The key component from preventing fear (inevitable) from turning into anxiety (preventable) is to recognize there is creating space between a stimulus, presumably negative, and a response. Benjamin Foley talks about how having a checklist, not unlike a pilot’s or doctor’s, that can help us create us navigate our responses to adverse events. This buffer-building between stimulus and response is a key component of meditation or mindfulness training.
Back in early 2015 we noted the growing influence of meditation and mindfulness, specifically in the world of business and investing. In a recent podcast with Dan Harris of 10% Happier fame, entrepreneur Gary Vaynerchuk predicted that meditation would soon become a mainstream practice and some big businesses would be built along the way. Meditation is commonly thought of as a stress reduction tool but can be more than that. Ulrich Kirk in an interview with Jason Voss at Enterprising Investor stated:
Absolutely, I believe that this kind of research will help empower people to see the benefits of mindfulness and how it impacts the domain of decision making — that people will practice it, not only for the pursuit of stress reduction for which it was originally developed, but also for its direct benefits in terms of improving the decision-making process.
This is especially important in light of the changes in society that increasingly throwing ever more information and stimulus our way. From a Heleo interview with Emma Seppälä author of The Happiness Track: How to Apply the Science of Happiness to Accelerate Your Success:
We live in a time when we’re taking in more information than ever before. A 2009 study showed that we take in 35,000 gigabytes of information every day, which is enough to crash a computer in a couple of weeks. We’ve come to a point where we absolutely have to unplug in order to create some balance. Our ancestors, even our parents did not consume this much information, and we haven’t yet found a balance because it has happened so fast. I think that’s why a lot of people are finding meditation to be so revolutionary in our culture where we are such doers, just sitting and doing nothing for a few minutes is actually balancing us out and there’s so much research showing the many benefits.
Pausing to take a breath, and god forbid to let ourselves get a little bit bored can do wonders for our mood and creativity. This can allow us to sort real, tangible fears from those that are either simply a threat to our ego or so remote as to be not worth considering. Khe Hy writes about the two:
(M)uch of the time, our deepest, darkest fears are pretty overdramatic. There are legitimate reasons to grapple with extinction fears, but much of the time, we’re not really in mortal peril—the issue has a lot more to do with our fear of losing face. This self-awareness can help get out of panic mode and start problem-solving. As mountain climber Jimmy Chin has said about managing fear: “It’s about sorting out perceived risk from real risk, and then being as rational as possible with what’s left.”
In investing sorting perceived from real risk is difficult but necessary. An excessive focus on risk will hold us back from taking the kinds of risks that make it possible to generate the kinds of returns we need to meet our goals. Robert Seawright at Above the Market writes:
When we worry about our investments, we tend to look at our statements more…The net result of this worrying is substantially lower returns.For most of us most of the time, worrying will surely be counterproductive. It will lead to bad decisions and poor returns. So please, remember, worrying is a serious offense.
If we are lucky our lives are long. Finding a way to put a buffer between the many (negative) stimuli and our responses is a key component in being to live a more meaningful, calmer life. There is nothing wrong with recognizing that we all need (professional) help from time to time navigating the roiling waters of fear, anxiety and depression. But in the end we all deserve a chance. As novelist Jami Attenberg at Longreads recently wrote:
We should all be allowed to feel safe in our lives and love ourselves. We should let ourselves feel free to fly.
*It should be noted that anxiety and depression can also arise in individuals with other chronic or persistent disease states.