17 Dec Why do stocks keep rising even during political turmoil?

Q. I’m trying to understand the higher stock market. I get that businesses benefit from the Trump tax plan but there is so much uncertainty about politics and trade and everything. Shouldn’t investors be nervous?
— Not getting it

A. Looking at the news of the day, you’re right that there’s a lot of turmoil out there.

You’re also correct that uncertainty is usually not well-received by big investors.

But you should look away from the headlines and focus on the big picture, especially if you have a long time to stay invested.

There’s always something going on in the headlines, but history has a lot to teach, said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton.

He said you can take these examples to heart:

• There was rampant inflation in 1978. Ten years later, the market more than doubled.
• In 1982, unemployment was ugly. Ten years later, the market had tripled.
• Deficit was the problem in 1984. Ten years later, the market more than tripled.
• We saw oil issues in 1986. Ten years later, the market more than tripled.
• We had a recession in 1992. Ten years later, the market more than tripled.

Are you seeing the trend?

“Investing is taking a long-term approach with your money,” Lynch said. “While I care about what is happening now, reasonably, 10 years from now, the stock market will be substantially higher than it is today.”

He said a friend of his offered what he called a great way to explain the market: 4-4-4. What does that mean? On average, one out of every four months you will lose money, one out of every four quarters you will lose money and one out of every four years you will lose money.

“If you could go to Vegas, and you knew that on average that for every three out of four hands of blackjack you would in, then what would you do?” Lynch asked. “I would place the same bet over and over again knowing that on average I will win 75% of the time. That is how the market works.”

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This story was originally published on Dec. 17, 2019.

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