MONDAY MORNING: The market has a case of ‘indicatoritis’

You hear this investment advice often enough: Invest for the long term.

But does anybody really believe it?

No, judging by the wild swings in the stock market of late. If everyone is really investing for the long term, why do the Dow and the Nasdaq Composite Index look like wild carnival rides?

Undoubtedly, a number of theories and ruminations have been advanced about this, but there is one view that I’m starting to believe. Jan Holman, a market strategist at American Express Financial Advisors, has been talking for some time about an affliction known as “indicatoritis.”

She calls it an insidious disease. “It can cause us to make reactive, emotional investment decisions that work against us, instead of thoughtful rational decisions.”

That sure sounds a lot like the stock market right now.

The only problem is, there are so many indicators these days that it’s hard to tell which ones really mean something.

You have earnings, earnings surprises, whisper numbers and analyst upgrades and downgrades constantly emanating from Wall Street.

Meanwhile, the government publishes reams of statistics, from durable-goods orders, jobless claims and trade deficits to consumer prices, retail sales and housing starts, among others.

Lately, it seems during any given week, the announcement of one indicator or another sends the market swooning to a new low or soaring to a new high. Talk about manic depression.

Obsessed

According to Ms. Holman, indicatoritis is highly communicable.

“It typically enters our system through our senses,” she says, when a friend, colleague or investment adviser starts talking about an upcoming indicator as if it really has the power to change the force of the economy.

“Assuming any government indicator and statistic has the ability to predict the future, this week’s number obsesses us,” she says.

Once the data are released, the scramble is on. If it’s good news, investors seem to stampede into the market. If it’s bad news, they’re in full-scale retreat.

“Before we know it, we’ve joined the ranks of infected investors who bob and weave with every new statistic,” she says.

Forget the fact that the indicator has virtually no meaning beyond the next quarter or the next month. The market takes off like a scalded duck or it sinks like a stone, and investors are left to wring their hands and tear out their hair.

Of course, Ms. Holman offers all the sound practical advice that you always hear from financial advisers.

Work with a pro, she cautions. Consult a financial expert for assistance.

Plan. Draw up a roadmap. “To get where you want to go, you should know how to get there,” she says.

And, finally, “Keep your eyes on the long-term financial prize,” she advises. “The primary reason we plan and invest is to achieve our long-term goals.”

That’s solid advice; exactly what you would expect to hear from an adviser. But really, who believes it?

Judging by the market, most people appear to invest to make a quick buck.

In fact, a broker once bragged to me how he bought a stock at $9 and sold it every time it rose to $12 or $15 a share. Then, when the stock fell again back to $9 on some new market swing, he would step in and buy more.

It seems to me that more than one investor is playing the market swings, and somehow I have this gnawing feeling that I may be missing something. If I could just once ride this roller coaster, sell high and buy low on the market swings, I could easily be retiring 10 years earlier.

I just have to find the right signal, the right indicator to make my move. I think this is what Ms. Holman is talking about. I sense a creeping case of indicatoritis.

Fortunately, I’m not a nervous person, and I truly am investing for the long term. When my adviser says to ignore the market swings, I tend to believe him.

Does anyone else?