Thinking of Getting Out Already? Or are you still on the sidelines?
It’s been a nice ride straight up, hasn’t it? It’s as if investors have been strapped to the SpaceX Dragon rocket recently launched. It’s as if the market, since March 23rd, just hasn’t even looked back. This is not what we should expect to continue, as markets aren’t linear, but does it mean we are headed through the floor again?
Remember that volatility is the short-term price we pay for long-term equity returns.
The Nasdaq has reached all-time highs in the last few days, but don’t forget what it took to get it there. It was not a straight line up, and while it’s nearly impossible to predict day-to-day volatility with consistent accuracy, it’s important to keep a long-term perspective. There is always a reason to worry, and there will always be a reason not to invest.
Here are a few just from the last few years:
2020: The COVID-19 Pandemic, -30%+ Market Rout, Impeachment, The Great Repression
2019: Saudi and Russian Oil War, Trade War, Hong Kong Protests, Impeachment
2018: Trade War, N. Korea Nuclear Threats, -6% -7% -10% and -20% market pullbacks
2017: US healthcare repeal, Trump & Russia, Terrorism, Brexit Fallout
2016: Brexit, Pres. Trump Election, Q1 12% correction
On days where markets wobble to the downside, don’t be so quick to forget:
- Jobs numbers of 2.5 million added vs the expectations of 5 million jobs lost last week
- All 50 states have begun some form of re-opening or relaxing of restrictions
- We have far more resources to battle COVID than we did when the first wave hit
Investors need to look years out, not look out over the next few days or weeks, when making their investment decisions. Many investors have 30+ years left in their lifetime, and even those with less than 10 years still have a lot of time left where their portfolios can take short-term pullbacks. If investors are looking to make the bulk of their returns over a few weeks, they should not be in the market to begin with.
Remember that markets are forward-looking. Any news that comes out is often a reflection of what has already happened in the recent past, so assume that news has already been priced into the market. I often hear “breaking news” on CNBC that I have been discussing for months with our portfolio managers and other investment professionals.
And remember this if nothing else from this article: the market has no feelings, but it does have investors that can get emotional. Don’t let your emotions stymie all the hard work and effort you’ve put into building your savings up in the first place. The market helped you along the way, let it continue to help you. You believed it then, so why not believe in it now?
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Focus Asset Management to provide information on a topic that may be of interest. Copyright 2020 Focus Asset Management.