The False Peaks of the Economy

Those of you who know me, know that I love to climb mountains. In Colorado there are 53 peaks above 14,000 feet and I have climbed 29 of them. One thing I’ve learned in doing this is that when you are climbing an unknown mountain, it’s important to keep your expectations calm.

Often as you climb you will look up at what looks like the summit of the mountain. You will orient your motivation and expectation around what you think is the summit. But as you approach it, your heart sinks as you come to realize that the summit is still a ways to go. The problem is a visual one. A false summit is one that blocks your view of the real summit behind it. The experience as you climb is multiple “temporary summits” as you go up and down, but generally up, on the way to the final summit.

The economy and the stock market feel the same way. It’s slightly different emotionally because it is a very good thing to realize that there is still more growth to go. Further, it is also extraordinarily different, in my view, because I don’t believe that there is ever an ultimate “summit” of the economy. The experience of investing is the continuous experience of temporary summits along with the happy surprise that there is, yet another temporary summit.

Where this is really similar to climbing mountains is that in the moment, that false summit or temporary summit always feels like the final summit. In our minds, it’s always hard to see how it could be any higher. In the economy, it’s never obvious where the new jobs come from or where the growth in GDP come from. In the stock market, it’s never obvious where the company earnings will come from. But, in time, they always come and it pushes our growth path higher and higher. Higher, along a path with inevitable ups and downs, along a longer term growth line.

In practice, it’s important to tell yourself that while it may or may not make sense for the economy to keep going and that there is no obvious way for it to go higher, history tells us that it keeps pushing higher regardless of what makes sense to us as we approach the temporary summits.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

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