market turbulence airplane flying

Maintaining Calm in the Midst of Market Turbulence

In our Quarterly Market Brief last week, we focused on risk and market turbulence. Specifically, how to mentally prepare for when things don’t go our way. As is often the case with these conversations, investing is the jumping-off point for a broader discussion about peak performance informed by other disciplines.

Market Turbulence and Risk

Investors often confuse market turbulence or volatility with risk. The unpredictable ups and downs of the market can be stomach churning. But that isn’t true risk. The real risk is the possibility that, in a volatile and confusing situation, you make an emotional decision that puts your financial security in jeopardy. Someone who stuck to their investing plan in March of 2020, weathered volatility. Someone who sold their stocks may have added risk to their long-term financial future.

The lesson is that our response to a situation has an outsized impact on results, but developing the right mindset takes work and it helps to have people to emulate. Last year, I wrote about Patrick Mahomes of the Kansas City Chiefs and the idea of playing with “No Conscience”.  In leading his team to a come-from-behind victory in Super Bowl LIV, Mahomes models how athletes and investors should perform when their ‘scoreboard’ is not in their favor.

Silencing the Crowd

I want to go one step further here and address the idea of “silencing the crowd”. By crowd, what I really mean is distraction. For some athletes, it might be a throng of thousands in a hostile stadium. It might be the noisy thoughts in a golfer’s head before a silent backswing. And for an investor, the “crowd” might be the deluge of information and opinion of daily financial news. If you can find an inner stillness in those environments, you are on your way to peak performance.

Maintaining calm

If you are a leader, however, there is another necessary step. And that responsibility is to not contribute to the noise. In fact, leaders need to be actively suppressing the noise and the drama for the benefit of everyone around them. For an example of that, look no further than your last airplane flight.

When turbulence hits and pilots come over the intercom in a smooth, folksy voice to tell you about the rough patch in the air, the seatbelt light, and the plan for finding smoother skies, they are modelling behavior.

That smooth, folksy voice was made famous by Chuck Yeager, the test pilot who was the first person to break the sound barrier in 1947. While travelling 700 mph strapped to a rocket, Yeager’s composure was on full display as he raced at the edge of space. His radio communication was calm and matter-of-fact, relayed in the slight accent of his Appalachian home. That coolness became a hallmark of his character, which was depicted in the book The Right Stuff by Tom Wolfe, and a movie of the same name.

It was the drawl of the most righteous of all possessors of the right stuff: Chuck Yeager.

Tom Wolfe

market Turbulence and peak performance

When we find ourselves in the fray, whether hurtling through the atmosphere or in the daily turmoil of our leadership, peak performers have two responsibilities to their team: Silencing the crowd and not contributing to the noise. 

Financial advisors, especially, should bear this responsibility considering the forces already aligned to create confusion and uncertainty for investors. For investors: Your advisor’s voice might differ from Chuck Yeager’s twang, but she or he should bring that same sense of calm when a volatile situation has a chance to turn into real risk.