Do I Worry? A Timeless Question in the Face of Market Volatility
Back in the 1940s, Stanley Cowan and Bobby Worth wrote a song called “Do I Worry?” The Ink Spots made it a hit with their smooth vocals. Frank Sinatra even covered it. My favorite rendition is by Ernie Andrews. I’m not sure it would be a hit today, but I digress.
This “do I worry” concept popped into my head recently when the Dow Average dropped over 1,000 points. While talking with one of our clients, I asked if this big drop made her worried. She said no, but then added, “Should I be?”
Several things were mentioned as the cause of this significant decline. But sometimes prices just get too high, and they pull back – it’s as simple as that.
So, I’ll mention a few things that many people worry about, but the question is: Should you?
The Yen Carry Trade and Interest Rates
How many of you have heard of the “yen carry trade?” That’s when investors and hedge funds borrow yen at a zero interest rate, convert it to another currency like the dollar, and earn 4 or 5% on treasury securities or maybe even buy US stocks. That worked great until the Bank of Japan signaled a rise in interest rates, and free money was no longer free. Selling ensued, and the market got whacked by over 1,000 points as measured by the Dow. Should you worry about the carry trade? I would say no.
At the same time, the pundits on TV started calling for the Federal Reserve to have an emergency meeting and cut interest rates by 50 basis points, or ½%. The funny thing is the markets have already cut interest rates and have done the job of the Fed. So come September, it is likely the Fed will just come along for the ride. So should you worry about interest rates? Well, unless you are expecting a call from Jay Powell, the head of the Federal Reserve, I would say don’t worry about it.
Inflation and Control
Should I worry about inflation? Everybody is impacted by inflation, and it isn’t going away. There are too many factors that will cause inflation to stick around: government spending on defense, green energy, deglobalization. All inflationary. But should you worry about it? That’s up to you, but in my mind, the things to worry about are the things you have control over, and you can’t control government spending.
Financial stuff like spending, portfolio allocation, holding enough “sleep at night” money in the bank – you can control that. Health, diet, and exercise can be controlled. Family – you can’t control your family members, but you can control how you act, how you carry yourself, and the example you set.
The Human Nature of Worry
You know there’s more than a handful of things to worry about. But to stress out over things you have no control over is a waste of precious time. And of course, that is so much easier said than done because worrying is human nature.
And as the song’s final lyric says, “do I worry? You know dog gone well that I do.”
Until next time, I’m Phil Albitz – thanks for reading.
