Where do you think the stock market is headed…a sophisticated investor asked me yesterday.

I then asked him, “Why is that important to you?”

He seemed to be a little aback with the question and there was an uncomfortable silence for a minute… Then I said, “It depends on where you want it to go…”

I know this response is a little vague but before I could utter another word and clarify what I had just said, he annoyingly asked, “How is the stock market direction dependent on me?”

I told him, “Well, no one knows where the stock market will head next. No one even knows where the stock market is headed tomorrow or even in thirty minutes from now. More importantly it does not matter where the stock market is heading in general.”

Did we know a few days back about Israel’s attack on Hamas?

Does anyone know if this will escalate into something else?

To cut the answer short, I don’t know and neither does anyone else…This is the truth…

But I can tell you this much, over the last 40 years in India and even a century in the US, the stock markets have typically gone up 70-75% of the time and they have gone down 25-30% of the time Even between periods when stocks go up or down, there are times when it seems like they are going nowhere…Such is the nature of the stock markets…

A point to understand here is that the stock market usually goes up but not always…and it’s impossible to know the top and bottom of the stock market…Many smart bullshitters though will come up with theories and backtesting strategies to tell you that they know the exact periods between the top and the bottom (if not the top and the bottom).You will rarely hear, “I don’t know and it doesn’t matter to you. Because what you should do is not dependent on where the stock market is headed but it’s rather where you are headed…where is your life headed?…how are you aligning what’s important to you with your money?

By that I mean …do you need the money now for some purpose?

If so, then you should sell…

If you don’t need the money for anything, you should stay invested (and let it compound)… and if you have additional long-term money (means multiple decades), you should invest irrespective of whichever smart person comes and talks gloom and doom… And in this case, someone had pitched a pint of doom to him…

As I have repeated, I don’t know where the stock market is headed tomorrow or even day after…and the truth is it does not matter where it’s headed if you don’t know where you are headed…The key is: where are you heading?

But why do we worry about the stock market going down?

Well, the answer has to do with our biology and evolution, and in the interest of this post, I will leave my biology response for another time… The point as we all know by now is that stock market declines are temporary, and every wise investor has had to pay the price by riding the temporary declines…This is a toll or tax we all must pay… There is no other way…

The question that you need to ask yourself: Is there something the stock market has not overcome?

The answer: There is nothing the stock market has not overcome…

Scams and Scandals (Harshad Mehta, Ketan Parekh, Enron, World Com to name a few big ones)

Dot Com Bubble Bust during which NASDAQ fell down by 80%… Between March 2000 and October 2002, the NASDAQ fell from 5,048 to 1,139…

The Global Financial Crisis that almost took down the global financial system…

Oil and Inflation Shocks…

COVID-19 Crisis and the global lockdowns and shutdowns…

Wars including two World Wars (and Indo China, Indo Pak, Russia Ukraine…)

Haven’t you already experienced these?

I bet you have…

I understand it’s difficult to go through such times alone…But it’s history rather than headlines that we must look for wisdom of what’s likely to happen … The crisis of the day will likely get resolved…even if no one has a clue of how it will get resolved...The point is it will get resolved one way or the other…The crisis of the day might be hogging the headlines today… Gloom Times and Doom Experts will even sing the death song “This time is different” on a very high decibel …It is exactly at this point that we must remember that crises have always passed in the past and this one too shall pass…

Because there is nothing the stock market hasn’t overcome…

There is nothing and there will probably never be…

I know never say never but here is why I confidently say never…

Let’s say a new Crisis X takes place…

We don’t know whether it is World War 3 or something else…

What do you think the executives and managers of the largest and profitable companies will do?

Will they just sit and do nothing?

In anticipation of a recession, not even an actual one, companies such as Google, Meta and many others laid off several thousand people simply to protect margins…All of this in anticipation of a recession…Google parent Alphabet laid off 6% of its workforce or 12,000 people, as it grappled with economic uncertainty that hit the company’s bottom line last year, especially its core advertising business.

I can go on with hundreds of such examples across the world, but the point I wish to make is that executives and managers of companies will not simply sit and do nothing… They will take steps to protect earnings, margins, and growth…and any long term move in a stock can be explained by the underlying earnings of companies, expectations around these earnings and uncertainty about those expectations…

There’s a very important question we all need to ask ourselves from time to time.

Say it with me… Why?

Why is it important for us to know every now and then where the stock market is headed? Why do we invest how we do? Why do we behave like we do when it comes to investing in the stock market?

After all, the moment we start asking, “Why?” is the moment we’re likely to discover that our behavior doesn’t always line up with our values.

This type of introspection isn’t easy. And I suspect it’s one of the key reasons we do stupid things with money and investing. We’re afraid to know why we do what we do, so we never take the time to understand.

But here’s the thing: Asking ourselves why we make a certain money decision is integral to our financial success, even if it takes a bit of time and effort to reach an answer.

Go ahead… ask yourself: Why?