Uptrend vs Downtrend: Why Everything is Directional

uptrend downtrend
4 min read

When I was in high school, there were a few people I sometimes hung out with. We would sometimes skip classes, go to town, play pool, and have drinks. 

At that age, it felt good to rebel a bit. When we were together, we were loud and annoying. But we thought it was cool. 

I was talking to my best friend last week about how most of those cool guys ended up as losers. My friend Quincy grew up in a different city, but he also had the same type of friends.

Those guys started their adult lives on a downtrend. They didn’t go to college, took low-wage jobs, went to clubs every week, had unstable relationships, racked up debt, and so forth.

In life, things usually follow a trend. The trend is mostly going upward, and things are getting better, or it’s downward, and things only get worse. Even when things are moving sideways, it often feels like a downtrend because everything else around you seems to keep moving up.

Around the same time I was in high school, my parents made me aware of this important lesson. They say I did okay in school, but they knew I had more potential. They didn’t want me to follow the trend of the people around me.

So they continuously supported me to prioritize education. They knew it well. For both of my parents, life was hard. They saw the older family members degrading every year. 

People who started their adult life off on the wrong foot ended up sick, addicted, depressed, in nearly all cases. While it’s common that people turn their lives around in Hollywood movies, it’s very uncommon in reality.

People don’t change their lives overnight. While it’s good to see people who change for the better and maintain that change, it’s not as common as we want it to be.

There are trends everywhere you look

In the stock market, you often find companies that are on the decline. They might have posted strong growth for years, but if they stop growing, Wall Street tends to drop them like a brick.

When a stock is on a downward trend, there is no bottom in sight. A stock that’s trading at $200, can go to $100, and people think, “Wow, that’s half the price. What a bargain. How low can it go?”

The stock keeps dropping, and at $50, someone says, “How much lower can it go than this?” You get the idea. The stock keeps dropping and dropping until it reaches $10. And what happens then? It might trade in the $8 to $12 range for years. No wonder people become afraid to invest.

A recent example of that is a company called Lending Club. The company traded for around $130 in 2014, and slowly went down until it traded around $4 in 2020. But the company started growing again due to a change in strategy and growth in the lending market. It seems like they’re on an upward trend for now.

If a company wants to make a comeback, they need a serious change in strategy. They need to post massive growth numbers again. 

In our personal lives, it’s the same way. When we’re on a downtrend, we can bet it will only get worse unless we make a big change. You can’t do the same thing and expect a different outcome, as they say.

That was also what my parents forced me to do. I needed to stop wasting my time, and I needed to get educated. I needed a strategy that actually worked. And education is a strategy that has always worked better than doing nothing. 

Ups and downs are normal: Keep going

In 2020, one of the most popular investors was Cathie Wood, who runs ARK Invest. Her main fund (ARKK) returned a staggering 152% in 2020, making it one of the most successful funds of the pandemic era. 

Her funds all have been on a steady uptrend since 2018. And as a result, she attracted billions of dollars. All of a sudden, everyone wanted a piece of those great returns.

But in 2021, ARK’s Innovation ETF was down 14%, after being on a downtrend pretty much all year. And naturally, people are less excited to invest with her.

I wouldn’t be surprised if ARK keeps going down in 2022, but I also wouldn’t be surprised if Cathie Wood outperforms the market over the next 5 years. That’s because she mostly invests in disruptive technologies and new industries.

Before those types of investments pay off, they experience a lot of ups and downs in the market, but also on their journey towards business success.

Life never moves in one single direction. There’s no perfect state of mind. Even though many people desire to have equilibrium, that’s not the nature of life.

No matter what the trend is in your life, stay focused on your responsibilities and things you value. Focus on what you control and keep moving on. Eventually, your momentum will get you on an upward trend again.

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