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  • Writer's pictureRobert Dunn, CFP®

During Times of Stress and Uncertainty It’s Time to Lean In

Key Takeaways

  • A decade-long bull market and historically low interest rates made us complacent.

  • Doing nothing can be just as dangerous to your plan as making a hasty decision.

  • We cannot predict the future, but we can control how we react to the various curveballs that life throws at us.

  • Following a plan and making minor adjustments as life circumstances change has served our clients well over the decades—and it will again going forward.

Many of you who played baseball growing up know that hitting a curveball is one of the hardest things to do in sports. When a rock-hard sphere is coming right for your head at 90 mph, the natural inclination is to get out of the way. But good hitters know you have to lean into the pitch rather than bail out. They’ve learned to recognize a curveball as soon as it leaves the pitcher’s hand and know it’s usually going to break over home plate for a strike instead of hitting them on the head or hands.

At times like these, many people may be questioning the wisdom of sitting still (i.e., sticking to one’s plan without making changes to it), when there’s so much volatility and uncertain in the markets, if not the world at large. When faced with uncertainty, it’s tempting to abandon your plan, bail out of the markets and head for the perceived safety of cash or gold.

The news media and the talking heads on TV only make it worse. They’re constantly telling you we’re in a dire situation and the world’s going to end. Sure, there’s turmoil in the economy and financial markets, not to mention geopolitical instability, lingering COVID, and global warming.

All the unknowns we face today have convinced many people that things are not good and you better take precautions. Fanning fear may be good for clicks and ratings, but it’s not healthy for your financial plan. As our clients know, the plans we’ve put together for them have already accounted for the likelihood of the markets being disrupted from time to time by extreme events. There’s going to be ups and downs in your life – financial and otherwise. But in the long run, with the right plan in place, you’re going to be fine.

As I explained last month, we cannot predict the future, but we can control how we react to the various curveballs that life throws at us. And sometimes it starts with having the courage to lean into adversity – like a good hitter – rather than shy away from it.

Nassim Taleb, author of Antifragile: Things That Gain from Disorder is a risk management professor and former hedge fund manager who believes our society has been trying to insulate ourselves from randomness and volatility in all aspects of life – the economy, our health, political life, education, personal finance, etc. But all those safety nets only make us less able to cope with adversity when the big shakeups occur. In other words, we’ve become too fragile, and we need to learn to lean into randomness, disorder and volatility to become stronger. Leaning in not only makes us more resilient, but teaches us how to profit from those disruptions when others are running scared.

Just as regular exercise builds strong muscles and bones, and just as vaccines expose the immune system to a small stressor so it can become stronger, Taleeb believes “a well-controlled burst of stress can help organizations evolve and adapt to potential challenges.”

Taleeb argues that when you try to remove volatility and unpredictability from a system, problems in the system become less obvious. So, we become complacent. The problems lie dormant, growing more severe until they reach massive proportions. To highlight this phenomenon, Taleeb uses the example of a forest, which will always be at risk of fire. Yet, the danger of a large, devastating fire is often decreased by a series of smaller fires, which Taleeb argues purges the forest of its most flammable materials while leaving most of the trees intact. Volatility, like the small forest fires, prevents the larger event. By preventing uncertainty in our systems, we are building up the flammable material for a firestorm.

Real-world Example A couple we work with was looking forward to retirement after raising three children and putting them through school. The couple was risk adverse and was not comfortable with the short-term volatility of the markets.

When we first met them, they were thinking of purchasing an annuity since they’d been told the income was “guaranteed” no matter what was happening in the financial markets. Sounded great in theory, but in order to receive the guarantee, however, the couple would have to “annuitize” the contract. Doing so would disinherit their three children. As you can imagine, this part of the annuity was left out of the presentation they attended. Fortunately, the didn’t go forward with the annuity and we started working with them to develop a more cohesive financial plan, investment plan and a distribution strategy that better aligned with their risk tolerance and long-term goals. It took some education, but now the couple is very happy that they still have the assets for their lifestyle and can leave a nice starting point for their children. Please do not allow your fragility to the markets make decisions that will hurt your overall financial objectives.

Resetting our priorities

After a decade-long bull market and historically low interest rates, I think we all got complacent in such a favorable investment climate. Complacency is the wrong kind of doing nothing. Again, sticking to the plan we create together and making minor adjustments as life circumstances change has served our clients well over the decades. They’ve always made it through the crisis de jour just fine. During times of extreme stress and uncertainty, it’s tempting to think “this time it’s different.” I’m pretty sure it’s not.

Also consider Roger Gibson’s book Asset Allocation: Balancing Financial Risk if you still think you can time the markets during times of uncertainty. Great baseball hitters know you never step into the batter’s box without a plan. As in life, a pitcher won’t tell you when a curveball is coming. But learning how to recognize the curveball and adjust to it without fear will keep you in the win column time after time, crisis after crisis.


If you or someone close to you has concerns about your portfolio’s ability to withstand inflation, recession and market volatility, contact us any time to discuss. We’re happy to help.


ROBERT B. DUNN, CFP® is the President and Managing Partner of Novi Wealth

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