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The Stock Market – A Godly Perspective

When Jesus began the Sermon on the Mount, he proclaimed the  Beatitudes as the way to authentic happiness. The first of these stated that poverty of spirit would enable us to inherit the Kingdom of God. In other words, the first step on the road to joy begins with a healthy detachment from material goods.

Later on in the same sermon, Jesus taught that building up wealth for its own sake is foolishness and that we should be more interested in spiritual riches.

So when we save and invest, are we building up wealth for its own sake?  Have we lost sight of the spiritual riches right in front of us?

Saving for college, retirement, paying off your mortgage or caring for your family as a realistic goal. These things are a way to prepare for long term needs and usually involve some sort of investment in the stock market directly or via mutual funds. And the recent ups and downs in the market can be stressful. But if our investments are for the long term, then we shouldn’t stress over what happens in the short-term, right?

Let’s take a look at some statistics provided by Fidelity Investments. A bear market is defined by a 20% decline from a recent peak—like a 52-week high. Since 1926, there have been 16 bear markets, with an average length of 22 months and an average market loss of 39%. On average, the gain in the first year after a bear market is 47%.

In 2006, just before the 2008 recession, the national savings rate was only 3%, which was the lowest savings rate in 73 years. When times are good most people don’t believe they need to save for the future. When the 2008 recession hit many people had no financial cushion to fall back on. After the recession, the national average for savings had increased to 5.9% in 2010 and by 2012 the national average increased to 11%. The savings rate increased because people remembered how bad things were in 2008 and they wanted to protect themselves financially.

And then between 2012 and 2019 the market was skyrocketing, everything was good and the national savings rate dropped like a rock to 3.2% in 2017 (last recorded average). Everyone forgot about what happened in 2008. Here we are in 2020 and everything has turned upside down again.

Think about the story of Joseph in Genesis. Joseph saved during 7 years of plenty in order to survive 7 years of famine. The key word here is “discipline.” Joseph was disciplined. He saved during the good times to be prepared for the not so good times.

As a general rule, many people lack discipline with their financial lives. Too many times they don’t see the value of practicing self-denial. Our culture keeps telling us that we “deserve” to have whatever we desire immediately. We don’t need to save, we can use credit to buy everything we want. But practicing Joseph-like discipline puts us in much better shape when the economy takes a bad turn.

So how do you apply discipline to your savings? Make it automatic! Set up an automatic deduction from your paycheck to your 401K. Try to increase the amount that you save every 3-6 months. If your company doesn’t have a 401 plan, have a broker/dealer make automatic deductions every month into your investment accounts. It’s amazing how much you can save by being disciplined.

Check out the 401(K) Contribution Effects on your paycheck calculator on the compasscatholic.org website to see how you can maximize saving for the long term.

While watching the market fluctuate day to day may be disturbing, don’t make any knee jerk reactions like pulling out of the market entirely and putting all of your investments into cash. If you try to time the market, by buying at the low point and selling at the high point you will probably lose money.

Continue investing as you have been and take advantage of dollar-cost averaging. A down market can actually work to your benefit. The same about of money you invested 2 months ago will buy more shares in a down  market. When the market recovers you will have that many more shares to grow as the economy rebounds.

The big question is who knows what the market is going to do?

1 Timothy 6:9-10 says, “Those who want to be rich are falling into temptation and into a trap and into many foolish and harmful desires, which plunge them into ruin and destruction. For the love of money is the root of all evils, and some people in their desire for it have strayed from the faith and have pierced themselves with many pains.”

Focusing too much on the ups and downs of the market will cause stress, tension, worry, anxiety, and depression—all of which can take your focus away from God.

When we have resources, the tendency is to first look to money to solve our problems. We should first look to God. Don’t trust what you can see with your eyes, trust in the invisible living God.

In Proverbs 11:18, King Solomon said, “Rich people imagine that their wealth protects them like high, strong walls around a city.”

We need to remind ourselves that wealth—like our health—is completely uncertain, and can be lost in a heartbeat. The Lord alone will be there for us always!

Join us on the Compass Catholic podcast for more about staying calm in this time of crisis.

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