I want to check in with you about the market volitivity. It's been an uncomfortable journey the past six months. I want to share some perspective...
A bear market is defined as a -20% drop from the peak. Stocks are currently down -18%, so we are close. Some different perspectives:
“Man, stocks stinks”
“Stocks are dropping every day!” –The last time this happened was when the tech bubble burst 20 years ago (when stocks fell 8 weeks in a row).
“This year stinks” - this is the worst start to the year for the stock market since 1940.
“Again? Really?” – if stocks fall a bit more, this will be the 3rd bear market in 4 years. On average we have a bear market only once every 4 years.
And a bonus “Bonds stinks too? Are you kidding?” fact – The return for U.S. bonds so far this year is -15%. The worst full year return for bonds is -2.9%.
“Relax, we’ll be fine”
“Stocks aren’t in a bubble anymore” -- stocks are becoming more fairly priced now.
“We’re just giving back some gains that were too high to begin with” -- even after a -18% decline this year, the trailing 3-year average annual return from stocks is still +12.7%. 5-year annual return is +12.3%, 10 year is +13.8% per year. Stocks are still the big winner.
“People overreact” -- CNBC has run a “Markets in Turmoil” special episode 106 times in the last 12 years. Every single time stocks were significantly higher a year later. They ran one of these episodes on May 5 of this year.
“Time to separate the pros with a plan from the pretenders” – the best time to make money is when everyone else is freaking out. The strong hand wins. As Warren Buffett said “only when the tide goes out do you discover who’s been swimming naked”. Chances are he’s talking about short sellers.
As always are watching and monitoring things closely. If you would like to talk about your portfolio and review your personal & long term goals please let me know...