To say this has been a tough year is an understatement. While for me and my house it hasn’t been bad, for many others, things have been difficult.
I had many clients deeply affected by the tornado that swept through Western Kentucky last December. I had a client from Eastern Kentucky send a drone picture of her house in August with flood waters up to her gutters. I had clients in Florida with front row seats to witness Hurricane Ian pass over their heads. Undoubtedly, the worst are the clients dealing with a grandchild’s brain cancer.
Each of these are literally tragedies, and there is no grading scale for tragedies. There are no minor tragedies.
And, you may have noticed it has not been a rosy picture in the investment world. In the past 12 months, the S&P 500 is down almost 25%. The few people that have called with concern about their accounts all seem to understand that they haven’t lost anything if they didn’t sell anything, however there is usually a perceived “but”:
- But, it feels different this time.
- But, what if X gets/doesn’t get elected?
- But, when will it get back to where it was?
My responses are usually:
- It feels different this time because we are living through it now, just as it felt the last time we had a decline like this. It is in every news story front page and casual conversation.
- Historically, it does not matter who is elected. If you want to see the proof, I will send a graph starting in 1926 showing there has been no correlation between the party in the White House and market performance.
- No one knows when a recovery will happen. No One. The shortened version of the very long story is in the past 20 years we have seen 4 periods when the S&P has declined 20% or more and we are currently in the 4th. The time it has taken to recover to the previous peak has been between roughly 3 months to 3 years, and the current unpleasantness remains to be seen. To me, the bigger point that each have recovered, so far. From the earliest version of the S&P in 1926, there has been a full recovery of every decline – every single time.
My Dad would often tell my brother and I that “Of all of the world’s problems, money problems are the best kind to have as they are the easiest to get rid of”. That lesson means much more to me now that it did then. I think most would agree they would prefer to experience a stock market decline than a tornado, a flood, a hurricane, or a dreaded sickness. My heart goes out to those that have experienced both.
One last thought. While there is little escaping a natural disaster or disease, investors have the luxury of deciding how a market decline impacts them. Once we understand that every decline in our lifetimes, and in fact every decline in the history of investment markets has eventually had a full recovery, any long term risk of loss has more to do with the investor than the investment.
As always, I would love to hear from you. All the Best,
Bryan Trible, CLU, CRPC
*The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance, Investors cannot invest directly in an index.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results.
Sources for statistics used:
“Markets have rewarded long term investors under a variety of Presidents”. S&P Data, a division of S&P Global.
“Bear History – Covid selloff is the only recent bear market with a fast recovery”, Bloomberg.com
“Bear Markets: How deep is your loss?” fidelity.com
S&P 500 history: S&P 500, Wikipedia.com, “Key dates and milestones in the S&P 500’s history, Reuters”
Direct quote from Louis E. Trible, Jr.