Looking Back to Help Us Look Forward

We do not often talk about the current market environment in this space, but once again feel that it is timely to do so. Investors are coming off a prolonged rebound at an unprecedented pace from the Covid-induced selloff of February-March 2020 and have recently experienced the first 10%(+) correction since that time. This volatility can be quite unsettling.

What we want to stress is that geopolitical events have happened many times in the past (certainly during my almost 30-year career) and the negative markets that accompanied them have seldom lasted very long. We last wrote in this space about the market in April 2020; the S&P 500 was at 2488…less than two years later, it is in the 4200-4300 range.

In Q1 of 2020, it sure felt like we were not coming back to prior levels any time soon. Yet, despite the speedy recovery and new lofty equity market highs, the period of rapid growth with very little downside volatility, lulled many into believing the potential for a material market reversion was a myth, a dark legend of the past. Well, as markets have shown us more recently, it is not. Instead, pull-backs are a healthy and necessary feature of market cycles. Though none of us have a crystal ball and the ability to predict with certainty when equity market declines will occur, we can say with confidence that they will happen at some point. We plan for them and take pride in building client portfolios designed to weather the storm.

When we go through your GPM (Goal Planning and Monitoring) reviews, one of the scenarios we always show is if the markets acted like they did in 2008-2009 for the next year. The hypothetical scenario illustrates equity market declines of anywhere from -19 to -29% and shows the accompanying loss of dollar value in your portfolio. We ask you how you would feel from choices like: “So worried I wouldn’t be able to sleep” to “Worried, but it wouldn’t keep me up at night” to “Not happy, but ok” (my personal favorite). Most of you say that you would be “Not happy, but ok” and that you would “Hold on [you’re] invested for the long term.” We would ask you to ignore the noise and remember that same sentiment you offered with a clear mind and stable market.

Linked below is a piece we put out last week from RJ strategist Mike Gibbs that we find very insightful and thought it was worth emphasizing again for anyone who missed it.

Click here to download Market Thoughts on Russian Invasion of Ukraine - 2/24/2022

-Gary Weiss, March 2022

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.  Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.  Past performance does not guarantee future results.