The Roller Coaster

That beautiful old-fashioned merry-go-round that we have all been riding on for the last few years has suddenly turned into a fear-gripping roller coaster with a sheer drop on one side. We were rudely thrown from one to the other.

I have never ridden on a roller coaster but I have been investing in the market for more than 15 years. It’s sort of the same thing. Anyone who invested through the financial crisis knows that.

I don’t want to liken this to the financial crisis because it’s totally different.  Think back to 2007 and 2008 – we had the worst economic disaster since the Great Depression.  Right now (and granted I have no idea where this goes) we have a virus that is a bit like a bad cold for most people who get it, but seems to unfortunately be severely impacting those who have pre-existing medical conditions, the elderly, and smokers (particularly those that fall into two of those camps).  There is obviously the human impact and cost, but our financial and economic systems are intact.

The markets had risen fast, and now they have come off the top fast.  The magnitude of the fall is not that great – as I write the S&P 500 has fallen 13.8%, which is exactly in line with the average yearly peak-to-trough fall since 1980 (see this post).  So, there’s nothing unusual in the percentage fall.  What is a bit more unusual is that just 10 days ago the market was at an all-time-high.

I don’t want to bombard you with data here, because when the ride gets wild, I’m not sure data helps.  If you are a data person, I will direct you to this great piece that looks at how the markets responded to previous virus outbreaks. 

I want to remind you, as one human to another, that this too shall pass.  Every crisis that has ever gone before us has been temporary.  The markets have, and always will, resume their uptrend.  In general, the faster they fall the faster they recover.  When the panic subsides, we will struggle to remember this.  Do you remember any of the other virus panics?

We knew this was coming – we didn’t know when, we didn’t know why, we didn’t know how fast – but we knew the market would fall.  This is what we signed up for.  This is how we earn our returns.  We hold fast, we breathe and we get on with life.

If you are a worried client, call me, that’s what I am here for.  The best advice I can possibly give is to turn off the TV and try not to click on the ‘clickbait’ headlines.  Go back and read your investment policy statement (if you don’t have it handy, email me – I will send it to you).  Your investment portfolio has been constructed based on your goals and on the vast weight of history, not on headlines.  We cannot make long-term investment policy out of headlines. 

You could also revisit your Anxiety Balance Sheet or re-read this post titled ‘The World Never Ends’ or this one titled ‘You can’t stop the waves’.

If we get to a 20% fall – I will be emailing those of you that I know have excess cash to strongly recommend we put it to work in the markets.  Be ready!  My guess is that the recovery on the other side of this will be just as fast as the fall was/is.

If you are not a client and you are finding the current market troubling and worrying, here’s what I offer.  A cup of coffee (or something stronger) and a second opinion.  Come into my office and sit for a while (it’s a lovely place to sit).  We’ll talk and I will look at your current asset allocation.  If you are in good shape, I will tell you so, and happily suggest you continue as you are.  If I think there are changes that could be made that would leave your money more aligned with your goals, I will tell you that too, in plain English.  Either way, the coffee is on me.

Georgie

georgie@libertywealth.ky