Financial Lessons from the Great American Eclipse

One of the most spectacular phenomena recently took place on American soil. Millions of Americans traveled far and wide just to enjoy the "Great American Eclipse” as it’s been dubbed. The eclipse darkened portions of our country, with a 70-mile wide radius stretching from Oregon to South Carolina experiencing totality. That’s the moment when the sun is completely blocked out by the moon, and the only part of the sun you can see is the corona, which are the gasses of its atmosphere.

The quirky cosmic event is all thanks to geometry. The moon orbits at just the right distance from Earth to appear to be the same size as the sun - just like in a picture, you might look like you’re holding the Statue of Liberty in your hand - it’s all about perception. While solar eclipses aren’t exactly rare (they actually happen every 18 months) this particular one was the first total solar eclipse since 1776, whose path stayed completely in the lower 48 states and was exclusive to the United States. (For more, see: The Stock Cycle: What Goes Up Must Come Down.)

Most eclipses take place over water, unpopulated regions of the earth or barely clip populated areas, therefore making them seem like a rarity. So seeing one is still certainly a once in a lifetime opportunity for sure - especially since the path it took won’t be repeated for roughly another 375 years. The last total solar eclipse seen in the U.S. prior to this one was 1979. If you were in the path of totality, you actually saw day turn to night. So why exactly would I write about the solar eclipse on a financial website? Well, because there are plenty of fiscal lessons to be learned from this spectacular event.

1. Cycles Are Inevitable

The moon cycles. The earth cycles. And the markets cycle too. When it comes to business cycles, there are four phases you can expect to see.

  • Expansions: This is when economic growth happens. Unemployment rates drop. GDP is up. And the bull market dominates the news. Sound familiar?
  • Peak: The rise before the fall. Everything is on top of the mountain when we’re experiencing a peak.
  • Contraction: The fall begins. You’ll see an economic decline taking place. How long it will last is anybody’s guess.
  • Trough: The lowest point. It’s when you have a nowhere else to go but up.

2. Cycles Come and Go

Whether it’s a bull market or bear market, if you’ve spent any time investing then you know there are upswings and downswings. Good times and bad times. Wins and losses. The only thing that remains the same is the fact that something is going to change. Nothing stays the same forever. The eclipse isn’t going to last forever, or even all day for that matter. There is a window of opportunity for you to view the eclipse wherever you are. There’s also a window of opportunity for you to invest. (For related reading, see: Market Timing Fails as a Money Maker.)

That doesn’t mean you should try to jump in and out of the market to avoid the downs. Timing the market just doesn’t work. Stay the course and know the cycle will change for the better. Then when things are good, know it’s likely going to go wrong at some point but don’t abandon ship. If you’re in the path of totality, you only have a few minutes to take your glasses off and take it all in. Same goes for the markets. You only have so much time to invest. Don’t miss it by letting emotions cloud your judgment!

3. Keep Your Glasses on So You Don’t Go Blind

Everyone knows looking at the sun could blind you and that doesn’t change with an eclipse. The sun’s powerful rays can burn your retinas without you ever knowing it. Just like the eclipse, the talking heads on your TV will tell you it’s the end of the world every day. However, keep your focus. Don’t look at the naysayers. Keep your eye on the prize that you’ve chosen to be your end goal. Don’t let fear and greed blind you. That’s where having a good planner comes into play. They can be a source of stability when everything around you is crashing down. Their emotions are not invested in your money the way yours are. Planners have the ability to stay neutral no matter what the markets are doing. They will hold you accountable to looking away before your emotions leave you “emotionally impaired.”

Here’s the thing, enjoy the moment. Remember a total solar eclipse only happens where you live about every 375 years, so don’t miss out on the opportunity of a lifetime when it comes. Be it watching the next solar eclipse in 2024 or investing in the stock market, it’s highly unlikely you’ll regret doing either one. (For more from this author, see: The Roles Fear and Greed Play in Investing.)

 

Article Originally featured on Financiallysimple.com.  Heritage Investor, 11470 Parkside Dr Suite 201, Knoxville, TN 37934, (865) 690-1155, (865) 690-1155, is an independent firm with securities offered through Summit Brokerage Services, Inc., Member FINRA, SIPC. Advisory services offered through Summit Financial Group, Inc., a Registered Investment Advisor.