“Emotional Contagion is a term coined by behavioral scientists for a fairly universal aspect of human nature – that we tend to mirror the mood signals of others. Thus, when someone smiles at us, we are likely to smile in response, which in turn makes us feel a little more positively about them and our circumstances in general. In this manner, laughter will tend to prompt laughter, anger will prompt anger, and tears will prompt tears. From an evolutionary standpoint, emotional contagion is an important trait. It’s what allows a mother to comfort a child so effectively. It’s also what allows us to immediately adjust our demeanor when suddenly encountering friend or foe in the wild.”
This excerpt comes from Amor Towles’s short story “Hasta Luego” in his collection “Table for Two.” The story depicts characters in LaGuardia Airport as flight delays turn to cancellations amid an approaching snowstorm. The mood in the airport cascades into doom while order dissolves into chaos.
Feelings of economic doom and chaos are causing widespread concern in today’s financial landscape.
While reading the passage above, I recognized how emotional contagion, aka mood contagion, can spread anxiety amongst investors. The airport scene mirrors what many experience during economic uncertainty – a collective shift toward despair triggered by [fill in the blank]. Right now, that blank is brimming over with things like:
- The worries of our nation during this time of rapid-fire executive order governance
- Tariffs, government employee mass layoffs, and the ripple effects of it all
- A stock market that has compounded at approximately 15% annually since 2008
- Concentration in the “Magnificent 7 stocks”
- The constant news cycle, voices coming into our homes via TV, internet-connected devices, and discussions with our loved ones
BEFORE WE GET INTO THE DETAILS OF WHAT TO DO IN THIS ENVIRONMENT, LET ME HIGHLIGHT A BRILLIANT BLOG POST BY JOE WIGGINS ABOUT HOW WE TEND TO TAKE IN AND REACT TO ECONOMIC NEWS AND SOME INSIGHT INTO WHY AND WHAT WE MAY DO INSTEAD. (I encourage you to read the whole thing, but I am highlighting the core of the commentary here.)
The Lifecycle of Our Response to Negative Financial Headlines
When bombarded with negative financial news, we typically follow this pattern:
- A news story becomes the focus of investor/market attention
- We greatly overweight its long-term importance
- We develop ‘shallow expertise’ and form quick opinions
- We calculate our personal ‘exposure’ to the issue
- We inaccurately predict how financial markets will be impacted
- We either make a poor decision or struggle to justify not making one
- We move on to the next headline-grabbing story
- Within months, we entirely forget what concerned us so deeply
For any investor with a reasonably long time horizon, attempting to ignore whatever the market is focusing on at any given point in time is the sensible approach.
Unfortunately, this can be close to impossible for three reasons:
- It’s hard to ignore something when everyone else is paying attention to it.
- We are human and thereby exposed to the same risk perception biases as everyone else. WE MUST WORK EXCEPTIONALLY HARD TO BEHAVE DIFFERENTLY.
- Sometimes, something will matter to financial markets in a material way, and ignoring it won’t look smart.
Joe is writing to an audience of professional investors, but as news-reading Americans, we all can relate to the pattern.
To summarize what is coming below. Unless your personal financial situation has materially changed, our financial guidance is to stay the course. If the news is making you feel crazy, consume less of it.
The Remarkable Challenge of Standing Apart
What I’ve learned after years as a financial planner is just how profoundly difficult it is to think and act differently from the crowd. Even with a well-designed financial plan and clear long-term goals, the psychological pressure to follow what everyone else is doing can be overwhelming.
When markets plunge, and your neighbor, colleague, and brother-in-law act (selling investments, moving to cash, or drastically changing their strategies), the voice telling you to do the same grows louder by the minute. The anxiety of potentially being wrong while standing alone is genuinely painful.
That is the crux of emotional contagion. We are social creatures who evolved to find safety in a group. We rely on other people’s emotional states and facial expressions for clues about what is and is not safe, then adjust our emotional and behavioral responses accordingly.
The problem is that these biological survival benefits work better on a savannah than in the stock market.
That is why having a financial partner during turbulent times is so crucial. Sometimes, the most valuable thing we provide isn’t market analysis or portfolio adjustments but rather the emotional ballast that helps you resist the powerful current of collective panic or euphoria. Understanding that this struggle is normal—that feeling a pull toward the herd is human nature, not personal weakness—can be the first step toward making better decisions.
Golden Road Advisors’ Planning Philosophy is Contrarian
The Golden Road Advisors approach is contrarian, demanding discipline that most individual investors lack. However, we’ve arrived at our philosophy through rigorous examination of what truly increases long-term financial outcomes.
Daily, we are inundated with headline-driven product ideas from Wall Street asset managers. We vigilantly defend our clients’ life savings from investment ideas designed to enrich Wall Street, not the end-user investor. Many advisors have less conviction in the righteousness of their philosophies and, therefore, use products in attempts to assuage client fears. Our strong belief is that these decisions result in worse outcomes for their clients. We refuse to participate in this charade.
As a reminder,
- We are goal-focused, plan-driven, long-term equity investors. Our portfolios come straight from your most cherished lifetime financial goals, not from any guess about the economy or markets.
- We do not believe the economy can be consistently forecasted, nor the markets consistently timed. In plain talk, we don’t think anyone gains an advantage by attempting to outsmart the stock market.
- We, therefore, believe that the most efficient way to capture the full premium compound return of equities is by remaining fully invested all the time—no fancy footwork, just steady participation.
- We are thus prepared to ride out the market’s frequent, often significant, but historically temporary declines. During these bumpy patches, your reinvested dividends will result in buying more lower-priced shares—and the power of equity compounding will continue working for your long-term benefit, even when things feel terrible.
How Can You Protect Your Happiness and Financial Future?
Let me say that I am not suggesting we should ignore all the news. The economy and changes in policy can directly impact people’s lives and livelihoods. For example, if you work in a sector facing layoffs or live in an area particularly affected by economic shifts, these aren’t just abstract headlines – they’re your reality. I am writing from a hurricane-ravaged region dealing with economic challenges that will alter our area forever.
But for most of us, most of the time, we consume far more anxiety-producing content than is helpful. That creates an emotional flood, making it hard to see our personal situation clearly.
Remember That Certain Market Realities Are Unavoidable
Markets drop on average 14% at some point during most years—this is normal and expected, as the chart below shows. Long-term stock market returns have historically been excellent and come from the earnings growth of the world’s great companies. However, to capture these long-term returns, we must ride out these downturns.
These drops are part of the deal that comes with long-term annual returns of around 10%.
News and Negativity: The Hidden Impact
As your financial planning team, we’re interested in more than just your portfolio’s performance. We believe real wealth means having economic security and truly enjoying your life. Our goal is to help you make the most of your life in the long run, which matters even more when the economy feels uncertain.
The specific concerns change over time, but there is always going to be something in the headlines triggering collective anxiety on a massive scale.
Media outlets aren’t in the business of protecting your well-being—they’re in the business of selling advertising. Their revenue model depends on capturing and keeping your attention. Fear and anxiety are powerful attention magnets, which is why negative, alarming headlines dominate our news feeds. The more scared you are, the longer you watch, and the more advertising they sell.
At Golden Road Advisors, we observe this contagious despair firsthand. Clients who once felt confident about their financial futures express deep anxiety after consuming negative economic headlines or conversations with worried friends. Just as travelers collectively spiraled at the news of canceled flights in the excerpt at the beginning of this essay, we see how quickly financial confidence dissolves when our clients become surrounded by other people’s fears—fears often deliberately amplified by media outlets with profit motives diametrically opposed to your financial success.
What does this emotional contagion, supercharged by attention-hungry media, mean for your financial plans and ability to make good decisions?
Think about your home for a moment. It used to be a place where you could shut the door and be free from outside influences. Not anymore. Our homes are now full of devices that constantly feed us information and emotions from the outside world. Phones, TVs, computers, and tablets bring other people’s worries and fears into our living rooms, bedrooms, and dinner tables.
Worse yet, sophisticated algorithms have hyper-curated this content to our personal preferences. We don’t just receive random information—we receive information that will keep us engaged, which often means content that confirms and strengthens our existing opinions. This digital echo chamber exacerbates our views about the world order, reinforcing our beliefs while minimizing exposure to alternative perspectives. Our emotional reactions grow stronger while our worldview becomes narrower.
This technological transformation of our information environment matters tremendously when we think about how we make financial decisions.
As financial planners, our biggest concern with both positive and negative emotional contagion is that it will lead to irrational or unreasonable investment decisions that we believe strongly will result in worse outcomes for our clients. When emotional responses to headlines, social media, and conversations with friends drive investment choices, we typically see the following behaviors:
- Following market trends without critical analysis
- Making investment decisions based on fear or excitement rather than strategy
- Buying high and selling low—the opposite of successful investing
- Abandoning carefully crafted financial plans during market volatility
What Else Can You Do?
Review Your Financial Plan
Not to make emotional changes but to remind yourself that we built it to withstand these moments. We considered economic cycles, market volatility, and scary headlines when we created your strategy and took the necessary steps to protect you from them.
Notice When the News Is Making You Anxious
Are you checking your portfolio more often? Waking up thinking about the markets? Getting caught in spiral conversations about “what if” scenarios? That’s emotional contagion at work and your cue to be mindful of how those feelings affect your social behaviors and decisions.
Take a Step Back from the Noise
If you read the news daily, try weekly. If weekly, try monthly. Permit yourself to be less informed about the minute-by-minute market movements and political drama and more focused on your life.
Coping with Emotional Contagion: The Bottom Line
I’ve been through many market cycles with clients and seen how unpleasant markets can push even the most level-headed people toward questionable decisions. But I’ve also seen how a calm conversation and returning to fundamental principles can make all the difference.
If you’re feeling the weight of economic anxiety, let’s talk. Not to make drastic changes but to reconnect with your unique situation and help you escape the collective panic. Send us an email or call us, and we will cut through the noise together.
