Have you heard this saying before? It was used in one of my favorite movies, The Dark Knight, spoken by politician Harvey Dent. After some further research, I discovered two things:
  1. This quote is not original to the movie. In fact, it traces back to the year 1650 and is also linked to a historic Irish song.
  2. There is no scientific evidence that supports the saying. The darkest part of night is dependent on many factors such as the position of the moon and cloud cover.

Despite my newfound revelations, I do believe this saying can be relevant to us in difficult times. I also believe it has shown to be true when it comes to investing.

Any stock market transaction requires a buyer and a seller. When the news is negative, as it has continued to be lately, there tend to be more sellers than buyers. The basic rule of supply and demand then follows, and prices fall. Eventually, prices fall to a point where sellers or market participants who are sitting on the sidelines become buyers. As the tide starts to turn and news becomes more positive, more market participants turn into buyers, and prices rise, once again following the rule of supply and demand.
Recently, we have seen this phenomenon play out. As news got worse and projections of the current situation became more extreme, prices continued to fall. In this case, that fall was historically rapid. As we have settled into a ‘new normal’ of bad news, and when projections for the future were most grim, the effect on the market started to wane. Hopefully, this was our darkest time, and we are already seeing the dawn. As signs of recovery begin to emerge, prices will be driven up again, and possibly in a historically rapid fashion.
This is not a predication that we have hit ‘bottom’ or won’t have any market aftershocks in the short- term, but it is a reminder that when situations are at their worst, we can find hope and optimism in the idea that things usually seem at their worst right before they start to get better. Perhaps we are seeing that idea play out again in our current situation.
Thinking back on difficult times you have faced, when have you experienced this phenomenon? How did that experience shape your attitude when facing more difficulties in the future?