As it pertains to the stock market, what we're experiencing will go down as one of the worst periods ever due to the fact that it was the fastest drop of 30% we've ever experienced. However, this is about par for the course when in comes to investing in stocks to achieve your long-term financial goals.
The S&P 500 decline reached 34% from all time highs and was essentially pricing in the full extent of a recession (historical average is -37% in a recession). Similar declines occurred during the 1918 influenza outbreak (-33%). 50 years later, in 1969, a deadly flu pandemic drove markets down 36%. Ironically, another 50 years later, markets have declined again by nearly the same amount.
No one knows if we've seen the bottom yet because there is still not much clarity around the spread of the virus in the U.S. We have gained back some of the declines from those lows in the past couple of days. The Dow was up 2,093 points (11.3%) yesterday with big gains in all the other indices. It was the 10th best day for the S&P 500 and the 4th best day for the Dow in history. As I write today, the Dow is up another 1,158 points (5.6%). While this feels good, I am cautious to not feel too good since I know very well that tomorrow could bring a landslide in the other direction.
My point is to be careful not to let fear and greed overtake sound financial decision-making. The key to being a successful investor is to not let emotions hijack your intellect. Knowing ahead of time how emotions can ruin a thoughtful long-term investment strategy is the best defense you can have. Being mentally prepared for the inevitable downturn and accepting it as part of the rules of the game is the foundation of our strategy. Yes, it is painful and discouraging to see your nest egg plummet in value but stay optimistic that the ups will more than offset the downs. Over time, they always have!
Have faith in the system that the twin pillars of democracy and capitalism will continue to work in the future just as they have in the past. Have faith in yourself and don't second guess your decision to invest in the securities markets in the first place. And, finally, have faith in me that I will exert my best professional judgment on your behalf. Optimism is a core value of this great country and a fundamental teaching of the Good Book. It will carry all of us through the darkest day.
Call me if for no other reason than to vent. I don't have all the answers but I am a good listener.
All the best,
Ron (M: 910-431-6308)
Justin (M:910-612-4060)
"In bear markets, stocks return to their rightful owners" -J.P. Morgan
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