The Psychological Impact of the Market Collapse

When the Trust is Gone

We try to stay positive, to look toward the future; but the news gets worse each day and then worse again the next day.  It is clear that the financial news impacts us all, even if we try to ignore it.  We are getting used to this new norm of bad news and growing financial jeopardy.

How do most people respond to this situation and what can we do to improve it?

As a unique individual, you are likely to respond to this financial crisis as you have responded during other times of crisis.   The range of response ranges from despair to acceptance to resilience.  Despair worsens an already difficult situation while resilience looks for ways to bounce back, to improve your own well-being.

In general, we cannot maintain a crisis state of mind for more than about six to eight weeks.  What was once critical becomes the expected norm.  Our minds begin to accept the new norm and looks for ways to live with this new reality.  The economy grabbed our attention in early September when the government seized Fannie Mae and Freddie Mac.  We began to realize that this was no simple down cycle.  That makes it about 15 weeks since we entered this mess.   We are well passed the crisis stage even if we peg its start in October.

As a group we have become more somber, anxious and less secure.  We are looking for ways to stabilize our situations despite the economy’s behavior.  We will focus more on what we can control and worry more about what we cannot control.

We no longer trust our major institutions, including government, banks, investment professionals and big business, which we have looked to for leadership and security.  We are looking for guidance and support from our family and friends, and from our local communities and religious groups.  Who else can you trust?

This means that we are becoming less spontaneous, quieter, and focusing on more inward pursuits while looking for safe harbors during this storm.  We will have fewer parties; be more conservative in our behavior; look to ourselves, our families and our friends for mutual support; and we will reengage with simpler and sometimes more spiritual activities.  We will see an upswing in simpler food, watching movies at home, less vibrant clothes and an appreciation for what we have rather than what we want.  Showiness will be discouraged.  We are looking for our lost security and comfort.

How has the market’s collapse impacted you?


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