When there is volatility in the market, particularly in response to big economic changes in the news, it can be scary. Professionals like those at Nest Financial view this as normal and see them as moments for opportunity. It is important to separate the stock market from the economy. The stock market is NOT the economy. The economy is a real, living organism, while the stock market is simply an overly emotional spectator with short-term memory loss.
Imagine you are standing next to a crystal-clear mountain lake and throw a rock into it. The rock, of course, causes a splash and ripples that radiate across the lake. But eventually, the water smooths out again. Now imagine there are 100 people all throwing rocks into the lake… all creating splashes and ripples. No matter how many people are throwing rocks, or how big they are, the lake will always try to smooth itself back out. This is economy.
Sometimes a boulder falls in, and some of the water might splash out. To the stock market spectator, this can be scary. But that’s because it forgets that, no matter what, the ripples eventually smooth out and water finds its way back to the lake.
