The S&P 500 entered bear market territory (down 20% from its high) on June 13th …what now?
It has been a challenging time so far this year with inflation, rising interest rates, a slowing economy, supply chain issues, and a war in Ukraine all of which are contributing to current market conditions.
It is natural to have some feelings of anxiety when these things happen. These times never feel normal, but they are normal, especially after very good years in 2019, 2020, and 2021. Sometimes it’s hard to look at statements but over the longer term, these represent buying opportunities. Stocks are not short-term investments. From Bear markets (20% drop or more) on average, it has taken about 14 months to get back to previous market highs. We have included a chart of the S&P 500 showing returns after other historical downturns.
Investing is a journey which begins when you start working… you invest a bit each month, sometimes at higher prices, sometimes at lower ones. Today’s price is not statistically significant to realizing your overall plan. It is important to stick to the plan. Therefore, diversification and risk management are so important. In most cases, based on a client’s risk profile and time horizon we have strategies to protect long-term income regardless of market events and risk-averse strategies to decrease risk and volatility over time.
Every bear market in the past has been followed by a rebound and large gains... every energy crisis, inflationary crisis, deflationary crisis. War, political upheaval…. Literally, every market problem of the past has been solved and triumphed over by US-style capitalism in time. How much time varies.
Finally, remember that there are many other participants in the markets that are different from you. Some participants are speculating with borrowed money, some are using computer algorithms to buy and sell securities without any consideration for the underlying fundamentals of the company's long-term prospects. This all happens during your investment journey. These players are part of the investment ecosystem and it's OK. They provide liquidity to markets. Sometimes their action moves markets around.... don’t let this movement dissuade you from being a well-allocated, diversified, unleveraged, long-term investor. Don't let this movement change your 5 to 10-year plan into a 10-day plan.
Please let us know if you have any questions.
Rich, Todd, Dennis