Irrational Exuberance and Fear: Your Unexpected Enemies

Irrational exuberance and fear are our enemies. (Flickr/Smile & Frown/CC 2.0)

Kimberly Amadeo, in TheBalance.com, reported the daily highs in The Dow Jones Industrial Average (DJIA) since 1929. Last week, the DJIA established three (Sept. 18,19 and 20) all-time closing highs. Sept. 20 (the last record closing high of the week) was the seventh consecutive all-time closing high, the 41st in 2017, and the 58th since the 2016 presidential election. When the market moved above 20,000 in January; 21,000 in March; and 22,000 in August, it was the first time in history that the market had breached three psychologically important 1,000-point levels during a single year—and the year is not over yet.

For the week, economic positives probably outweighed negatives, but not enough to predict three all-time closing highs. On the positive side, the index of economic indicators, the Philadelphia Federal Reserve business outlook survey, export and import prices and housing permits and starts were above expectations. Initial jobless claims were lower than expected. A weak dollar and strong energy company prices also supported the market.

On the negative side, the housing market index survey, mortgage purchase applications, the FHFA housing price index and existing home sales were below expectations. In addition, increasing geopolitical tensions with North Korea, and increasing political uncertainty with health care and tax reform could have been strong or very strong negatives.

Regardless of the reasons for past market movements, or the future direction of the market, billions of stock market profits have been lost by investors getting out of the market (or not getting in) because of the fear of a market correction or worst. Billions of stock market profits are at risk, if buyers fail to manage risks—at some point, the market will go down. It should be remembered that no one can accurately and consistently predict prices over time. Risk management includes diversification, setting stops and/or a variety of other measures. Data-based decisions, founded on a written plan, are good insurance.

In the kingdom, believers are warned against assuming we know the future (we see in part and know in part, 1 Cor. 13:9-12) and are told to act accordingly and diversify. Believers are warned to take action when evil (danger) is observed or face the consequences.

"Give [translated 'divide' in NASB] a portion to seven, or even eight, for you do not know what calamity may happen on the earth" (Eccl. 11:2).

"A prudent man foresees the evil [translated 'danger' in NIV] and hides himself, but the simple pass on and are punished [translated 'suffer' in NIV]" (Prov. 22:3).

Believers are sons and daughters of the King, with the Spirit of the living God residing in us. Yet, even believers may face challenges with the flesh. When things are going well, the flesh suggests that things will never get worse again, or even that our good fortune is due to our great wisdom or faith. Bad things can and sometimes do happen when in the midst of good times or to the most faithful saints. When things are challenging, the flesh argues that it will never get better, that we have missed our opportunity or that it is too late now. It is never too late for a turnaround by God, and He has the habit of restoring with double (see Job). A kingdom attitude demands that we look for dangers, avoid evil and keep our confidence in God.

"A wise man suspects danger and cautiously avoids evil, but the fool bears himself insolently and is [presumptuously] confident" (Prov. 14:16, AMPC).

Every believer has a mission to fulfill. We have all the tools. Jesus paid the price and has the authority. He, has given us His infallible Word and has filled us with the Holy Spirit. We have no excuses. But irrational exuberance and fear are its enemies.

Many a believer has failed to do what the Lord is telling them to do because of fear—the Kingdom suffers, we suffer, our families and others suffer, and we risk not accomplishing our purpose. Other have placed themselves and others in danger because of a self-confidence originating with irrational exuberance—some have fallen as a result. We need to foresee dangers, forsake evil and put our confidence in the Lord.

In the parable of the talents (Matt. 25:14-30), a man traveling to a far country, entrusted five talents to one servant, two talents to another servant and one talent to a third servant. Returning, he found that the servant with the one talent had been afraid of loss and hid the talent. Because of his unfaithfulness due to fear, he lost his reward and suffered the consequences.

"So I was afraid, and went and hid your talent in the ground. Here you have what is yours" (Matt. 25:25, MEV).

But the servants entrusted with the other talents had doubled their master's money. The faithful servants saw the increase by trading. One can safely assume that these traders were cognizant of potential dangers and avoided them. In reward, these servants were called good, faithful, made ruler over many things and entered the joy of their master.

"His master said to him, 'Well done, you good and faithful servant. You have been faithful over a few things. I will make you ruler over many things. Enter the joy of your master'" (Matt. 25:21).

Let us all recognize that irrational exuberance and fear are danger signs in and of themselves. Let us recognize that when things are going well or poorly, we can experience a turnaround. We need to consistently look for potential dangers and minimize their influence in case they should occur. We need to keep our confidence in God regardless of circumstances. If we are faithful, we may well hear Him say "Well done, you good and faithful servant."

Dr. James Russell is a professor of economics at Oral Roberts University.

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