Stem the Tide

What Is Stem the Tide?

Stem the tide is an expression that means to attempt to stop or avoid a prevailing trend. In the context of an investment or a trade, it is often used when referring to one's own position. If the value of that position is losing money, closing that position would be said to stem the tide, or stop the trend of losing money.

A similar phrase in the same context would be "stop the bleeding."

What It Means to Stem the Tide

Stemming the tide refers to making a change. However, it does not necessarily constitute stopping the unfavorable trend entirely or immediately, but rather it implies a lessening or gradual reduction of the negative trend. Since the goal of containing it and eventually eliminating the negative trend is desirable, it may be acceptable for it to occur sometime in the future.

Stemming the tide in an investing context is used as a metaphor for reversing the effects of a long-term market trend. This context usually refers to macroeconomic trends in which the tide would refer to trends that may play out over months or even years, rather than short-term changes that may reverse in a shorter period. Issues such as inflation, high unemployment, or high interest rates, would fall into this category.

Origin of the Term

This idiom uses "stem" to mean "stop" or "reduce." Thus, "stem the tide" was originally used among seafarers to establish a course that would resist the tides or ocean waves, especially in stormy conditions, to literally hold back the tide.

Using this ocean metaphor for market trends was coined by one of the market's first technical analysts, Robert Rhea. Rhea was a proponent of Dow Theory, a form of technical analysis that he would use to call market tops and bottoms, and then profit from those calls. Tides are often referred to in the context of triple screen trading. Using this system, a trader uses a longer-term chart, or market tide, as the basis for trading decisions.

For instance, if a trader plans to trade daily they would examine the weekly moving average convergence divergence (MACD) histogram, as its slope provides some indication of the market tide.

How a Business Can Stem the Tide

For businesses that are bleeding money to stem the tide, there are several general steps that can be undertaken. The most obvious first step involves identifying the source of the losses and putting a stop to it. If losses are coming from overhead, reduce fixed costs. If losses are coming for poor productivity, get rid of unproductive workers or look to technological solutions. If it is a costly and ineffective marketing campaign, reconsider your advertising budget and branding efforts.

Also, ensure that your business has and is sticking to its budget and financial plan. Sometimes, drowning in debt can be solved strategically via a bankruptcy and restructuring.

Once the tide has been stemmed, as it were, rebuilding profits and growing at a reasonable pace without sacrificing quality or customer service is essential to re-emerge and survive.

Examples of Stem the Tide

Stem the tide is usually invoked to convey the meaning of reversing a negative trend and preventing it from getting worse. These trends can include an increasing crime rate, negative public opinion about a company, the loss of qualified workers from a given geographical area, negative demographic trends, and causes of environmental pollution, among many others.

For example, consider this sentence found in the definition of capital outflow: "Governmental restrictions on capital flight seek to stem the tide of outflows. This is usually done to support a banking system that could collapse in numerous ways."

One issue of current interest to businesses would be to stem the tide of rising healthcare costs for employees. Many cities in the U.S. are currently grappling with stemming the tide of departing qualified and skilled workers who are leaving for other more attractive areas. Another context where experts would like to stem the tide is in the decline of small business in the U.S. in the years following the Great Recession. At a smaller scale, a company might need to stem the tide of profit loss due to inventory shrinkage, talent loss, or being outmaneuvered by a competitor.

In the context of business results and trading shares associated with companies, this sentence comes from the article "Mall Anchors Hit Multi-Year Lows After Dismal Quarter:"

"Retail bulls have been touting the company's substantial real estate assets for years, but that has done little to stem the downward tide, especially with shopping malls all over the country now threatened with closures due to declining foot traffic."