gradually then suddenly

Half-Century Headlines: The 50-Year Financial Times of You!

photo shows a newspaper under a magnifying glass that reads "GOOD NEWS!"

Clients, we’ve discussed before how the pain of a loss is felt two times more greatly than the happiness from a corresponding gain. While this may be how our human brains are designed to experience things, we do have a chance to intervene: we get to define what a loss is. We also have the ability to recognize how time affects our experiences of pain and happiness.

Often, our losses occur suddenly: a quick drop in the market, the sudden failure of an engine, the physical (or emotional) loss of a friend.

Gains are usually slow-building: years and decades spent with a loved one, miles upon miles with your favorite car, the slow climb to retirement wealth. It’s hard to appreciate the full happiness of the good times in the moment. The quick strike of the sad times, however, tends to linger.

Journalists Stacey Vanek Smith and Cardiff Garcia put it this way: “This combination of sudden, bad things and slow, good things can mess up the way we see the world. We notice the sudden but miss the gradual.”

So the daily news cycle is successful in part because of that pain. Consider for a minute a world where there isn’t daily news. In this world, you get one newspaper every December 31, recapping all of the important things that happened that year. What would make the front page?

Now extend the time horizon. What makes the front page of a once-in-a-decade newspaper?

We encourage you to take this exercise and apply it to your financial life. Call it The 50-Year Financial Times of You. What’s above the fold? Would any of the four major financial crashes of the past 50 years get the top spot? How about that $4 that you spent on a coffee last Tuesday?

Clients, we each have the byline in our own 50-Year Financial Times of You. We’re grateful to be among your readers, and humbled when we’re included in the process—even if it’s in the funny pages.


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Gradually And Then Suddenly

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In the novel The Sun Also Rises, author Ernest Hemingway gives us an insight into an interesting mechanism. One character asks another how his bankruptcy happened. The reply? “Two ways. Gradually and then suddenly.”

It seems to us that many things in the economy and markets happen the same two ways. Prices rise slowly at first, then gain momentum. Or a market stalls and declines slowly for a time, then falls swiftly. Or business activity, at the bottom of a recession, begins to tick higher, almost imperceptibly, until it takes off.

And in our own affairs, we see the same situation. We talked recently with a client in her middle 70’s, who noted she now had higher income than at any point in her working years. Compounding builds wealth only gradually for a long time, then (it seems) suddenly.

(People who are liquidating investment balances with overly large withdrawals see the same thing, in reverse. Balances decline gradually, then suddenly.)

An important part of our work is helping people visualize those inflection points for trends that are nearly imperceptible at first. When we first begin to save a small amount each payday, it is hard to see the fortune that might emerge over time. And when markets seem to be just slogging through the mud month after month, positive changes are tough to imagine. Our role is to help people see how this works.

The same mechanism applies to our work in researching investments. For example, there are sectors that have done well in recent years, with abundant liquidity in a period with easy monetary policy. But we have seen this movie before: liquidity dries up gradually, then suddenly. This specific issue is on our radar.

The challenge is that investment prices and economic indicators have a lot of volatility in the normal course of events, most of it meaningless. Most years, the major stock market indices rise about half of all days and fall about half of all days. Not everything is a trend happening gradually at first, then suddenly. Some of it is just noise. We work hard to sort it out.

Clients, if you would like to talk about this or anything else, please email us or call.


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.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.