3-minute read
A friend of mine texted me this graphic with the question, “Where are we?”
What was your response?
I said probably between “Depression” and “Hope”.
Really? We’re that close to ‘Relief”, “Optimism”, and general positivity? Seems a bit premature.
To be fair, this is possibly my age showing through. My second answer would have been between “Anxiety” and “Denial”, but that didn’t feel right.
Why do you say that?
Maybe I’m trying to speak it into existence but consider this: 2022 marked the 7th worst year ever for the S&P 500 in its 99-year existence.[1] The bond market posted its worst year ever dating back to the 1920s.[2]
I get it but who’s to say lightning can’t strike twice? It’s not like you have to go back to the Great Depression to see the market fall three years in a row (see: 2000-2002).
True, the S&P has fallen three consecutive years three times in its history. It has fallen two consecutive years on one other occasion.
So, you’re trying to say it’s a rare occurrence? Honestly, that just doesn’t make me feel all that better.
I get it, believe me. I could provide historical context until the cows come home and it likely won’t change anyone’s feelings.
Then what will change my attitude towards the market?
Well let’s start with a definitive list of things that won’t help: politics, the news, CNBC, talking to your neighbor about their portfolio, politics, going all-in on gold.
That’s all?
Nope. Trying to time the market, checking your account 5x a day, sitting in cash…
That should just about do it.
The truth is everyone approaches it differently. The one thing to remind yourself, however, is this: negativity sells. And it sells like those “hot dogs” on dollar dog night. Check this out. It’s one of my favorite graphics of all time:
What do we have here?
This graph shows the market performance from March 2009 through December 2019, otherwise known as the post-Great Financial Crisis era. To date it is one of the best bull markets of all time.
Do you think we’re set up for another one?
No clue. But you can see that even historically good markets come with their fair share of negativity. Some of this negativity stems from valid concerns like those shown on the graphic. Then there’s additional pessimism that is frankly click bait fear porn.
How do you tell the difference?
It’s often quite difficult. It’s an art our media has perfected. Instead of trying to parse out what’s “real”, you’re better off reminding yourself why you’re invested in the market in the first place. Make sure your portfolio aligns with those objectives.
Then what?
Talk to someone you trust when anxiety sets in. This can be a spouse, friend, advisor, etc. Inner dialogue can be our worst enemy in rocky markets. Remember that investing does not have to be a solo mission.
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[1] All market data referenced can be found here: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
[2] The bond market is defined as the 10-Year Treasury bond market.
[3] https://ritholtz.com/2020/01/reasons-to-sell-stocks/