Why Pessimism Is So Attractive

Alain

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Alain Quennec

Financial Advisor and Portfolio Manager

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Markets have gone through some ups and downs in the last decade, and this has caused many investors to be worried and pessimistic about the future. Throughout history, people have been apprehensive about times yet to come. 

Ancient Greek philosophers opined on the recklessness of youth and the disregard for the wisdom of elders, heralding the downfall of mankind; yet here we are, at the pinnacle of societal and technological evolution. There is literally no better time to be alive than at this point in history. So why does pessimism feel so good?

The answer can be partially found in evolution.

Pessimism is based on fear of the future. The future is the unknown and it is human nature to fear the unknown. Fear is a strong emotion that has kept humanity alive for thousands of years— fear kept us from being eaten or killed when presented with danger. Fear is what keeps us safe!

Daniel Kahneman won the Nobel Prize for showing that people respond more strongly to loss than gain. "Organisms that treat threats as more urgent than opportunities have a better chance to survive and reproduce," Kahneman once wrote.

One needs to know when there is danger present and to protect one’s self, but also when opportunity presents itself to explore and look beyond the present uncertainty.

An optimist can also be a realist, understanding that there will be problems and bad times, but we’ll come through it, as we always have.

From an evolutionary perspective, pessimism cries out that danger is near and action must be taken: action trumps inaction for the sake of survival. As we live through a bad period, the pessimist says, "This time is different", and the permanent decline has begun.

Inaction, or staying the course, seems like "pie in the sky" optimism.

The fact that mankind has adapted to or solved previously existential problems has not diminished our fear of the future— it is wired into our brains.

When it comes to investment markets, fear sells. No media outlet will publish a message that states, “There are some current problems being worked on that will soon be solved and things will get better" - there’s no urgency in it, no fear, and fear is what sells.

Thinking rationally and calmly works best for rational endeavours, such as investing. Your Rogers Group Financial advisor is trained in rational and calm analytical thought. Rely on them for the best advice.