THE WEATHER AND THE STOCK MARKET HAVE A LOT IN COMMON
They’re both very unpredictable! Last weekend, the Northeast got walloped by a surprisingly strong snowstorm that dumped as much as two feet of snow in parts of Massachusetts. Central Park in New York City even set an October record with 1.3 inches of snow. And, this all happened before Halloween!
Likewise, the stock market has a habit of surprising investors with its ability to rise or fall dramatically in short periods of time. For example, remember the “Flash Crash?” On May 6, 2010, the U.S. stock market plunged for no apparent reason and briefly erased $862 billion from stock values in less than 20 minutes, according to Bloomberg. It then quickly rebounded.
As it relates to weather, we always know what season we’re in. One look at the calendar tells us whether its winter, spring, summer, or fall. And, depending on where you live, you have a pretty good idea – based on history – of what to expect for each day’s temperature. But, just like the Northeast experienced, you can have an “out of season” experience that messes up your best-laid plans.
The stock market doesn’t have four seasons, but it does have bull and bear markets, which are further divided into secular and cyclical. Market analysts have some general criteria that they use to categorize the markets into these buckets. Yet, like the weather, you could be in a bull market, but still have a nasty market drop that temporarily derails the path of the bull.
Bottom line, just like weather forecasters, market analysts may have a sense for general conditions in the market, but surprises still happen.
Weekly Focus – Think About It
“Sunshine is delicious, rain is refreshing, wind braces us up, snow is exhilarating; there is really no such thing as bad weather, only different kinds of good weather.”
—John Ruskin, leading English art critic of the Victorian era
Jonathan K. DeYoe
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