There is plenty to worry about these days.
Top of mind is the escalating tensions between Russia and Ukraine. Closer to home, high inflation persists, and the Fed is preparing to tighten monetary policy.
And while COVID is moving away from the front page, the markets have a lingering worry that another variant could emerge. Before long, the midterm elections will begin making headlines as well, as candidates take positions.
Add it all up, and you see the S&P 500 teetering on correction territory as some investors ponder the best way to ride out the next few months.
As we look at the current market condition and the invasion of Russia into Ukraine it is likely a greater near-term issue then it is a long-term issue.
The current S&P 500 price return is down year to date as of 2/24/2022 (11.34%). As we may continue to see some more volatility in the near future, we must remember that investing is a long-term process and over time the market will perform adequately.
During the 20-year Vietnam war the market averaged 8.5% return. During the 20-year Afghanistan war the market average 9.24% return.
During the period from 2000- 2020 we had two periods when the market was down, 2000-2002 (13.15%) average loss per year and 2008 (37.00%) loss. The 20-year average was still 6.76%
For those that want to get out of the market, the major problem is when to get back in.
You can see on the chart below that after 2002 the market was up over 40% the next two years and after 2008 it was up over 42% the next two years. This is the problem for those that get emotionally involved and will miss getting this return, because they will wait and see this happen and then get back in, missing a great opportunity.
During 2020 at the end of March when the US was shut down due to COVID 19 the market was down over (26%). Very view people paid attention to this because COVID 19 was occupying our minds. The market ended up over 16% by the end of 2020.
In October 1987, the market was down over 20% in one day but ended up over 5% for the year.
As I have mentioned before if you are doing financial planning, when you retire you will be taking out a small percentage of your assets for income each year, allowing the remainder of your assets to continue to grow. When you retire it’s quite possible you could live another 30 years and will need the market to provide you the returns needed. If you are currently retired, we have a plan in place to keep you from being concerned.
Over the past 13 years ending in 2021 we have had only one year when the market was down. In 2018 the market was down (4.38%), but this was a good 13-year run.
There is a lot of market data that I receive month in and month out and study from many investment firms over the past 40 years, that I will not bore you with. The conclusion that is consistent, is to be patient and let the market continue to work for you during the down years as well as the many good years. Continue to be more rational about your investing then emotional. With the market being down this is a good time to invest in the market, while it is on sale at lower prices. Unfortunately, many people do not think about this.
Please be patient!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index.