October 6, 2014

Weather & Climate are Like the Stock Market

Weather & Climate Are Like The Stock Market

Late last month, my wife and I went out to Seattle so I could attend the Financial Planning Association’s annual national conference. We followed the event with three days of hiking in Olympic National Park. Every mid-westerner knows that Seattle is as famous for its rain as Michigan’s Keweenaw region is for its snowfall. Just as you don’t ask a friend from Copper Harbor if they’ve had any snow in February, you don’t visit Seattle without expecting a bit of moisture. Naturally, we made room in the suitcases for raingear and umbrellas.

Sunny Skies and Fair Temperature

When we got there, however, we arrived at sunny skies and fair temperatures. The entire time I was attending the conference the weather was fair and pleasant. And our first morning in the National Park, we awoke to more of the same, sunny and mid-seventies. There was no internet connection at the lodge, so without the benefit of we packed our day-packs and set out on a long hike. In a place called the “Hoh Rainforest,” no less. Yeah, I should have seen it coming.

But there I was, confusing the short-term weather with the long-term climate. It started to pour about ten minutes into the hike. My smarter and more practical wife whipped out her lightweight rain jacket and marched on. I’d left my rain gear at the lodge, deciding it was too heavy and I probably wouldn’t need it. I marched on, too, but there was a lot more dampness involved.

When you’re hiking in a downpour, you spend a lot of time thinking, as you can’t see much and the natural beauty around you takes a, well, somber tone. So I was able to reflect on how silly it was for me to confuse the short-term weather with the long-term climate. It rains a lot in Seattle. The place I was in was called a rainforest, for crying out loud.

The Market Changes Every Day

Every day, the markets change. Sometimes they change multiple times during the day. Like the weather, short-term trends are volatile and mostly unknowable. Like the weather, pundits are very good at telling you what happened yesterday and are ready to point to a reason – a jobs report or a particular company’s earnings report drives the market the same way a meteorologist might tell you that last night’s cold front is responsible for the frost on your flowers. But will it be snowing at 12:55 today when I’m walking back from lunch? What will IBM be at the close of the markets this afternoon? Your guess is as good as mine.

Long-term, markets rise as the economy grows, just as long-term, you can bet on some rain while you’re in Seattle. But, just as Seattle will have its sunny days, the markets will have good days and bad days, weeks, months, and years along the way. Trying to predict them with any accuracy is impossible, despite all the forecasters’ efforts. Enjoy the sunny days when you have them, but have a rain jacket in your pack and keep on hiking.

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