Why Bad Times Are the Best Time to Make Money

Why Bad Times Are the Best Time to Make Money

Human beings are wired for survival, not investing.

Our ancestors survived by running away from danger, avoiding uncertainty, and seeking safety in numbers. Unfortunately, those same instincts that kept us alive thousands of years ago can be devastating to wealth creation today.

When markets are booming, headlines are positive, and everyone around you is making money, investing feels easy. Confidence is high. Risk feels low. The future looks bright.

Ironically, that’s often when risk is actually the highest.

The greatest fortunes in history were rarely built during periods of optimism. They were built during periods of fear.

Think about some of the biggest opportunities over the last century:

The Great Depression created opportunities for investors willing to buy quality assets at distressed prices.

The 1970s inflation crisis created enormous opportunities in energy and commodities.

The 2008 Financial Crisis created once-in-a-generation opportunities in stocks, real estate, and credit markets.

The COVID crash of 2020 produced one of the fastest bear markets ever, followed by one of the strongest recoveries in history.

In every case, the headlines were terrifying. The future looked uncertain. Experts predicted disaster.

Yet those willing to step into the storm often achieved extraordinary returns.

Why?

Because investing is ultimately about buying future cash flows. When fear dominates the market, investors often become willing sellers at exactly the wrong time. Prices fall faster than fundamentals. Emotions overwhelm logic.

The result is opportunity.

Warren Buffett famously said, “Be fearful when others are greedy and greedy when others are fearful.”

Simple advice. Extremely difficult to execute.

Most people wait for certainty before taking action. The problem is that certainty rarely exists in investing. By the time everyone feels comfortable again, prices have often already recovered.

Consider real estate.

When housing markets are booming, bidding wars become common. Buyers stretch their budgets. Investors justify almost any valuation because prices seem to only move higher.

Then the cycle turns.

Interest rates rise. Transactions slow. Negative headlines emerge. Suddenly nobody wants to buy.

Yet that is often when the best deals appear.

The same principle applies to stocks, businesses, and virtually every asset class.

Opportunity and uncertainty are usually found together.

This doesn’t mean taking reckless risks.

There’s a major difference between intelligent risk and blind speculation.

Intelligent risk involves maintaining adequate cash reserves, managing debt responsibly, diversifying appropriately, and investing in assets that have long-term value.

Blind speculation is chasing hot trends because everyone else is doing it.

The goal isn’t to gamble during bad times. The goal is to recognize that periods of fear often create favorable risk-reward opportunities.

For retirees and those approaching retirement, this concept is especially important.

Market downturns feel painful. Portfolio values decline. Anxiety rises.

But history shows that every major bear market eventually gave way to new highs. Investors who remained disciplined and continued investing through difficult periods were often rewarded for their patience.

The challenge is psychological.

When fear is highest, your brain tells you to protect yourself.

When prices are down 30%, it feels safer to sell.

When the economy appears weak, it feels safer to sit in cash.

When everyone around you is pessimistic, it feels safer to do nothing.

Yet wealth creation often requires doing the uncomfortable thing.

The greatest investment opportunities rarely arrive with a welcome sign attached.

They usually arrive disguised as bad news.

As investors, we cannot control market cycles, recessions, interest rates, geopolitical events, or government policy.

What we can control is our response.

The next time markets become volatile, remember this:

Good times make people feel rich.

Bad times give people the opportunity to become rich.

The investors who build lasting wealth are often the ones who maintain discipline when others lose theirs, remain optimistic when others become fearful, and recognize that uncertainty is not always something to avoid—it is often the price of admission for exceptional long-term returns.

Sometimes the seeds of your greatest financial success are planted during the periods that feel the most uncomfortable.

History suggests that those willing to embrace intelligent risk when everyone else is running for safety are often the ones who reap the greatest rewards when the clouds eventually clear.

Click here to schedule a meeting — I’m here to help you take the next step toward financial freedom.

Colin Symons, CIO Lloyd Financial Group

Iran and the US agreed to a peace deal, finally. Yes, details are still pretty uncertain, Israel doesn’t seem overly happy, and the whole process seems a bit messy. It seems likely that some details need to be ironed out. That said, oil is down around $80, rather than closer to $100, stocks are up nicely, and rates are continuing their recent drop.

Yes, this can still go wrong. The official signing isn’t until Friday, and it looks like some segments on both sides want to continue fighting. As I’ve said for quite a while, though, it’s a better idea to follow numbers over narrative. Right now, the numbers are saying the market is fairly confident this is going to happen.

As a quick review, war is not usually an event to sell. What tends to happen is investors quickly price in something around a worst-case scenario and start walking that back as events proceed. There can be shaky periods along the way, and there’s always the chance things unexpectedly get worse, but generally you want to buy into markets fairly quickly after an initial war dump.

What now? As always happens, some people don’t follow the script and are stubbornly looking and hoping for problems. The deal won’t get signed, we’ll go back to fighting, the market gains are undeserved, and so on. Sure, the market has come a long way since the initial downside move, but that’s how it goes. Oil peaked quite a while ago and liquidity has been strong to keep assets up.

Ending the war is a positive event and there’s no point in fighting that in the hopes something unexpectedly bad happens. I tend to think there’s a wide variety of places where you can invest in, right now. I favor the more risk-on areas like tech, but many areas should get a bid. Just pick something you’re comfortable with. About the only things I’d be slow to invest in right now are war beneficiaries like energy and safety stocks.

Even safety stocks can potentially get a bid if bond yields continue to relax, which seems likely. As yields come down, the large class of yield-hungry investors are likely to move out on the risk curve and start buying high-dividend safe stocks. That’s probably going to take a little time, though, and the focus there should be more on high dividends rather than just safe stocks.

Again, there’s just no point in being stubborn, here. Sure, you can average in over a period, but what’s likely to cause lasting problems, now? Yes, inflation may remain sticky for a bit as oil prices filter through other goods, but that’s a well understood mechanism that is very likely to be viewed as transient in nature.

In the meantime, all the systematic traders are going to be investing, and that’s likely to go on for a while. Trends will be going up and that will pick up more and more investors as it continues. Volatility will be going lower, and that will encourage more investors and more leverage. Of course anything can happen, but this is the normal order of things. Why fight it?

Industrial Production was 0.1% m/m vs. exp. 0.2%, with Capacity Utilization 76.2% vs. prev. 76.1%.

Empire State Manufacturing was weak, at 5.7 vs. exp. 14, with basically everything weaker, though Employment held up OK.

BoJ raised rates 25bps to 1%, as expected. They also decided not to taper bond purchases and the yen was largely unchanged on the news. That’s their highest rate since 1995.

FOX is acquiring ROKU.

Fiserv (FISV) was -11% yesterday unexpectedly left to become the Truist (TFC) CEO.

Kevin Warsh’s first meeting as Fed head begins today and ends tomorrow. We also have ADP Employment, Housing Starts, and Import/Export Prices.

Bottom line: The new Fed head starts his first meeting today.

Click here to schedule a meeting — I’m here to help you take the next step toward financial freedom.

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This content is intended to provide general information about Lloyd Financial. It is not intended to offer or deliver investment advice in any way. Information regarding investment services are provided solely to gain an understanding of our investment philosophy, our strategies and to be able to contact us for further information.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Past performance is no guarantee of future returns.

Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable

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