Reminder: Stocks Go Up Because They Go Down
While the stock market is poised to start the day on a positive note, the last couple of weeks have been a bracing reminder that stocks do not rise in a linear fashion. They can go down.
Such losses are one of the reasons stocks have historically provided attractive returns over the years. Investors demand higher returns to be compensated for the risk they incur by investing in something with volatility.
On the other hand, safe, short-term investments will typically offer low returns that barely keep pace with inflation. That's no way to grow your money over time.
The underlying movement of stocks are impacted by a variety of factors, including corporate earnings, investor perception, the political environment, and swings between fear and greed. The stock market fluctuates as different influences take turns being in the forefront. In the long-run the dominant theme has been growing corporate earnings that warrant investment in these companies.
The inevitably of downturns doesn't make it easy to invest in stocks, but it can make it rewarding.
I saw one of my favorites, Lyle Lovett, in concert last night at the Birchmere. It was an amazing evening of music and story telling with Robert Earl Keen. Lovett performed "Whooping Crane," a beautiful song that's well worth a listen.