By any measure, it has been a curious few years for investors. The headlines tell a story of markets marching confidently upward. And yet, the reality beneath the surface is a little different: it is not the entire market that has surged, but rather a small number of American technology firms.
After two decades in which crises followed one another with almost mechanical regularity, people have learned to distrust good news. When the market rises they see the start of the next fall. They want to get out while the going is still good. Many people are having that thought right now. And it’s entirely understandable.
But that doesn’t mean it’s the right move.
Markets are ‘high’ most of the time
We have a strange instinct, as humans, to assume that when markets are high, catastrophe must be lurking around the corner. There’s a sense that valuations are like mountain summits: once you’re at the peak the only way is down. But in reality, markets are more like escalators - slow, upward-moving, occasionally jolting, sometimes stopping entirely, but fundamentally built to ascend over time.
Markets are supposed to be high because economies grow. Profits compound. Innovation expands what is possible. Historically, equity markets spend most of their time not just ‘near highs’ but at highs. The last two decades were an exception whose long shadow has shaped how people feel about risk today.
This time is a bit unusual, but not for the reasons people think
It is true that the recent rally is being carried disproportionately by the big US tech firms. That concentration makes some investors understandably twitchy. But here’s the irony: the very thing that makes today’s market feel precarious - the dominance of a few giant firms - is also why some people feel compelled to sell. People remain anchored to their memories. Those who have lived through previous financial upheavals sees each new rise as suspicious; they imagine the floor giving way beneath their feet. They’re anchoring their expectations to the volatility of the past twenty years.
And anchoring, as behavioural researchers will tell you, is one of the most stubborn psychological quirks in investing. We fixate on recent experience. We assume what happened during the last decade will happen in next quarter or year. We treat the last crisis as a prophecy for the next one.
The psychology of ‘running for the hills’
Part of the problem is that our brains evolved to respond to threats. Profit feels like safety and selling feels like control. When markets are high, we imagine a cliff edge; when they fall, we imagine freefall.
But markets don’t care about our instincts. As Warren Buffett likes to say, ‘Be fearful when others are greedy, and greedy when others are fearful’. The point is that emotionally driven decisions tend to push people in exactly the wrong direction. They sell at the wrong time and buy at the wrong time because they are guided by emotion rather than by a long view of economic life.
Short-term chaos, long-term gains
In the short run, anything can happen. Prices can fall without cause or rise without reason. There is no sense in pretending otherwise. The market is subject to frenzies, rumours, and sudden reversals as surely as politics is. One must accept these movements as part of the landscape.
But in the long run the picture is different. Economic growth, however uneven, exerts a steady force. Companies expand, technologies improve and productivity increases. Over time, they push the market upward far more reliably than any trader’s hunch.
The sensible investor, therefore, is the one who resists the urge to take flight. He or she stays invested even when the newspapers grow excitable or when colleagues and neighbours boast of getting out at the ‘top’.
Which brings us back to the simple, slightly boring truth: it is time in the market, not timing the market, that matters.
And right now, despite the headlines, staying the course remains, historically speaking, the wiser move.