"Too weird for words"...that's our financial world right now. As a result, Chicken Little is running wild! And he is providing fuel for every single media outlet in this country. "The sky is falling, the sky is falling..." Well, unless you're willing to live in a bomb shelter that your grandparents or great grandparents built and eat canned goods for the next 12-18 months, you would do well to be calm in the face of this chaos that we're in today. Because let's face it, the storm's hit and the fan is blowing at high speed.
So let's talk reality about the financial marketplace. What are some fundamental truths that most people aren't aware of today? Consider that historical studies show that the Dow Jones typically experiences a sharp and sudden drop every 4.3 years. The last one we had in the US was in 2001, so we are 2.7 years overdue. The S&P 500 historically experiences a sudden drop of similar magnitude as we're seeing every 10 years. We haven't had one since the crash of 1987, making us 10 years overdue. What we are experiencing, while painful and frustrating, is not unexpected for those who understand the marketplace. What IS unexpected is the fact that it this occurrence coincides with all of the backlash of the real estate failures we are seeing.
I will not waste time pointing fingers or laying blame. There aren't many who are without responsibility in this mess. However, what I will highlight is the element at the HEART of our circumstance that can have the most effect at an individual level. That is, unequivocally, consumer sentiment. This is the only thing that we as individuals can affect personally...put our minds on the positive and move forward with life. While unemployment has risen, it is still nowhere near the 9.0 and 10.8 percent levels of our worst recessions as a nation. Nor is it at the average recession level of 7.6 percent. We are at 6.2 percent in the St. Louis metro area. That means that 93.8 percent of us do have work and we can continue to give 100% when we are fortunate to be able to go.
In the long run, if consumer sentiment continues to drop and panic continues to rise in our hearts and minds, we as individuals will only perpetuate what has befallen us. Spending tightens up because people are afraid-afraid to lose their jobs, afraid to run out of gas (which is at a new low of $80/barrel by the way, eyes on the pumps), afraid to lose their houses.
Panic is infectious and it is paralyzing. The media has done a fine job of spreading the virus. But let's face it, no matter how the fat cats on Wall Street have squandered or mismanaged, we as individuals still have work to do, mortgages to pay, families to raise and nurture. No matter what gas costs, we have to buy it to do the things in life we need to accomplish each day. No matter what milk and eggs cost, we have to buy them to feed our children. And we will. Because that's what we do. I'm not playing Pollyanna; I have the same worries and concerns, the same bills to cover each month. Yet I say that we are resilient. The United States has had 10 recessions throughout history and, on average, they've lasted 10 months, on one occasion it lasted as long as 14 months. This one too shall pass.
What to do? No sense complaining, losing sleep, worrying. Know that the nation will take care of itself. We have more resources and opportunities to restructure and rebound from the financial situation of today than in any other era in which such tribulations occurred. Be concerned for yourself instead. Take actions to make sure your future is secure. Review your financials with your financial planner (or your spouse/partner) and create a strategy for rebuilding. Give 110% at work and make yourself so valuable if a staff cut should come down the pike, you're not on the short list. Eat well, perhaps just less extravagantly. Your health is important. Spend normally, just more wisely. It will stimulate the economy and support your communities. Love your children and teach them courage and faith, not fear and scarcity. It will be your legacy to them and their future. The rest is all temporary.
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