Lest We Forget...
There is no way to sugarcoat it; 2022 has been an incredibly frustrating year in the financial markets. There have been only two prior years where both stocks and bonds have experienced negative returns (1931 and 1969). I have been through several difficult markets in my 30-year career and none of them have been fun….all of them have been painful in their own way. But, eventually, all of them ended, and markets moved on to new highs. This last point is easy to forget as the dog days pile up on top of each other.
In 1994, the Fed increased interest rates at a consistent pace for the first time in my young career. Bonds had negative returns and the portion of investors’ portfolios that I had allocated to “safe money” was not offering the insulation for which they are typically prescribed. At that time, I did not think I was going to last very long in this business. Nonetheless, 1995 proved to be the first of many spectacular years for stocks and bonds in my career.
In 2002, it seemed like the economy was going to be in the doldrums forever. The most aggressive areas of the market had been decimated after years of over-exuberance and the nation was reeling from the largest terrorist attack on U.S. soil since Pearl Harbor. But in the fall of 2002, stocks stopped going down and began a multi-year recovery. Investors that hung in there were certainly glad they did.
In 2008-2009, it seemed like Wall Street had finally killed the golden goose with the financial shenanigans that went on during the housing boom and bust. Many wondered if the system was broken or could ever be trusted again. But in March 2009, the economy and the markets began a very powerful recovery that once again made new highs in the financial markets and stayed the course on the longest bull-run in history—nine years, five months and 13 days (nearly 2.5x the historical average length of a bull market).
In 2018, there was a 20% correction that not many recall since the snap back happened so quickly. President Trump at the time was “saber rattling” with China and the markets got spooked. Markets rebounded +13% in the first quarter of 2019 and went on to have a very strong year.
In 2020, the market corrected by more than 28% in just 33 days. The rebound was extremely powerful and those who exited in fear or panic very likely regret their choice to not stay the course and think long-term.
In all of these instances there were valid reasons to be concerned, to think “this time it is different” and to want to make the pain vanish. RJ strategist, Michael Gibbs often says, “Markets don’t settle down, they settle UP!” He says this because by the time we feel better about the investment climate, no doubt a major recovery move to the upside has been made.
The chart linked below is a very powerful reminder that over time, riding out these uneasy periods has proven to be beneficial.
–Gary Weiss, November 2022
Any opinions are those of Gary Weiss and not necessarily those of RJA or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
