Insights for Investors: Fear or Optimism for Investors


Maurice StouseBy Maurice Stouse, Financial Advisor and Branch Manager

It has been noted that most people, when they hear or read things that speak to fear, respond with seeing that (about 70% of people) as credible. They believe it, or are motivated by it, or act because of it. Optimism by contrast tends to stir skepticism. Today’s investors and savers are faced with both messages on almost a daily basis.

Inflation has had its steepest decline in over 70 years, yet most consumers don’t see it that way and are fearful for the economy. That is either because of what they experience at the grocery store or the gas pump. And for sure those on the lower end of the income spectrum feel it mostly because they spend most of their money on living vs. saving or investing or buying luxuries. Gas prices, when adjusted for inflation, are lower than they were 45 years ago. When adjusted for inflation, a gallon of gas in 1978 was $4.37 in today’s dollars. As of October of this year, it was $3.91 (down from $4.11 in September).

And cars are more fuel efficient today. In other words, it takes fewer gallons today to go 100 miles than it did 45 years ago. The fear is that this necessity is more expensive than ever. The optimism is that it means consumers have more dollars to spend on other things. Consumer spending tends to support that.

Groceries are of significance. Groceries, like most other things, went up over 10% in 2022. So far in 2023, they are up 3.7% year over year. The inflation rate (The Labor Department’s number) came in at 3.2% for all inflation when that was reported in mid-November. That is down from over 9% late summer of 2022. Groceries over time have been closer to the overall inflation rate of 3.2%. Many grocery store chains passed their costs on to consumers, and one concern is that they are paying lower wholesale prices now, yet they are not passing those onto the consumer. Their earnings tend to suggest that.

Businessman using tablet and laptop analyzing sales data and economic growth graph chart. Business strategy. Digital marketing. Business innovation technology conceptHave you ever heard of FOMO? That is “fear of missing out.” That drives buying and investing behavior, because people see it as credible. The problem is that asset prices (think the so called magnificent seven stocks or housing prices over the last few years) accelerate well beyond their long-term valuations in a very short period. Some also call that a form of momentum investing. These assets appreciate with added risk. But, the fear of missing out is beyond the fear of these assets perhaps being overpriced.

Many investors think that U.S. companies, beyond those seven (Tesla, Amazon, Nvidia, Apple, Microsoft, Alphabet, and Meta), are performing rather poorly. The rest of the stock market – the other approximate 3,500 stocks – have been relatively flat. Earnings growth for the S&P 500 is now positive at approximately 3.2 year over year.

Raymond James Chief Investment Officer Larry Adams (CIO) note: “With 80% of the S&P market cap having reported, the 3Q 23 earnings season was generally solid. The earnings recession officially ended as the S&P 500 posted its first quarter of YoY EPS growth in four quarters, and the percentage and magnitude of beats were both above the 10-year averages. The strongest performers were the mega cap names, which saw earnings growth of >40% YoY during the quarter.”

We take note that historically stock prices tend to follow earnings. That is optimism, however, not fear.

The optimist sees huge growth in productivity, economic and wealth growth. The pessimist sees job losses, even though past technological innovations have resulted in job gains and standard of living gains. The potential impact across all sectors of the market and the industries they represent could be substantial.

Current rates on cash like alternatives like CDs is over 5%. Many investors and savers have taken advantage of this and are shying away from equities or even bonds. The common theme is that this is the most practical approach. Historically, when investing for the long term, if investors wait to see if stocks and bonds do better, they might be missing out on the potential growth when the market rebounds.

The national debt is over 33 trillion dollars. The fear is that the U.S. debt is not sustainable and there is nothing that will be done, and the standard of living and economic progress are going down along with the U.S. dollar. The optimism is that the U.S. historically has figured things out. One example of that is the dollar has appreciated year to date. The big three are Social Security, Medicare and Medicaid. The optimist says that the USA, for over 70 years, continues to lead the world economically. Its population and consumption are growing and that its open society makes it a bastion for innovation and invention. Sustained economic growth (compare post WW2) can lead an economy to significantly reduce its debt to GDP over time.

Gross Domestic Product (GDP) grew at 4.9% in the most recent quarter with historical averages of over 2% (Statista notes GDP averaged 2.1% from 1990 to 2022). We believe that productivity is growing, consumer spending has been resilient, that unsustainable growth of entitlement programs will be addressed, that inflation will continue to wane and that short-term rates will begin their decline soon. That is optimism. We tend to think it has credibility, but also acknowledge our thinking is in the minority.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor results will vary.

Maurice Stouse is a Financial Advisor and the branch manager of The First Wealth Management/ Raymond James. Main office located at The First Bank, 2000 98 Palms Blvd, Destin, FL 32451. Phone 850.654.8124. Raymond James advisors do not offer -tax advice. Please see your tax professionals. Email:

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Views expressed are the current opinion of the author and are subject to change without notice. The information provided is general in nature and is not a complete statement of all information necessary for making an investment decision and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results.