Given the market volatility we are experiencing this year in 2022 as a whole, I felt it necessary to dedicate a message to expanding my thoughts on the situation.
The S & P 500 index is currently down 21% year-to date, ending June 14th at 3,735. Market drops are not fun. They are stressful, and along with macro-economic conditions such as inflation and geopolitical events like a Russian war in Ukraine, it only causes worries.
Perspective is everything.
While the S & P 500 is down to 3,735, that is well above the COVID low of 2,237 on March 20, 2020. Even with the recent drop, we are 1,495 points or 66% ABOVE our low from just a little over 2 years ago.
The famous investor Sir John Templeton says that the most dangerous words in investing are ‘This time is different.’
One of the reasons we are in our current economic situation is that we have mostly solved the last problem we were experiencing – COVID. [This is not withstanding the surge in current cases and the persistence of new strains. Still, we are not in shutdown mode, we are travelling again, etc…] We made it through Covid with more money; we still have the desire for goods and plenty of extra money to spare. That was a major contributor to the imbalance in supply – demand, which has fostered the current inflationary environment.
Our economy is made up of hard-working individuals, well-run companies (Microsoft, Apple, Intel, Procter & Gamble, Nike, etc) and amazing entrepreneurs (Jeff Bezos, Elon Musk, Bill Gates). Our economy is based upon our business-friendly laws that allow for competition, which then allows for strong economic growth.
We have been through a global pandemic. We have been through global wars. We have been through a terrorist attack in New York. We have endured political strife and social challenges. Yet, we come out strong.
Timing the market is impossible. Personal experience and studies consistently show that when investors sell when the market is down, they seldom recover. It is much better to remain patient and let the market recover.
We tend to have recency bias – which makes us feel that ‘this time is different’. It is not.
Let me reiterate: Perspective is everything.
Control what you can control. Step away from the TV or change the channel. If you find yourself too caught up and worried, go for a walk, exercise, read a book, etc. Whatever gets you to a better space.
Our portfolios have not been immune to the recent drop. However, our team have been working hard to keep all our clients in a positive frame of mind, and to stay focused on the long-term goal.