It’s Just the Road

In the last few days stocks have taken a beating.  Volatility has finally returned after a near two year hiatus.  Friday February 2^nd saw the largest single one day drop in the Dow Jones Industrial Average history.  The following Monday (Feb. 5^th) saw some of the largest intraday swings in history, ranging from down over 500 points on the Dow to closing up over 500 points, with several corrections along the way.  Hopefully you were wearing your proverbial seat belt.

Many investors are calling this a “top”, the beginning of the next great recession, the last stop on the “Bull Market Express”, or even the end of the road. But here is the reality… it’s just the road. This is not the end of the road. This is not even a bump in the road. It’s just the road. History tells us that market’s do this. They move up, they move down. They trend sideways. They are at times, irrational.

So let’s put all of this recent activity in perspective.

First, markets typically experience at least one 14% or greater decline during a calendar year.  Twice that every 5-6 years.  While uncomfortable, that’s just normal and to be expected.  Like the road, it isn’t always perfectly smooth. If you can’t stomach those kinds of swings, perhaps it’s time to consider taking the train instead.

Second, these temporary downward movements create opportunities for long term investors.  Research shows that many of the worst days in the markets are followed by significant rebounds. In each of the cases reviewed since 1987, markets have been positive in each of the 1, 3, and 5 year time periods following a downturn.  Don’t let potholes derail your journey.  It’s just the road.

Third, to quote the great Texas country singer Robert Earl Keen, “The road goes on forever and the party never ends.”  Markets are incredibly resilient and constantly reallocating capital from the impatient to the patient; from the pessimist to the optimist.  Check out how the market has performed since 2008 despite all of the negative headlines. Remarkable!  Its just the road and the road goes on forever.

So pick your lane on the road and stay in it.  And, hire a good driver.  If you are prone to swerve in the ditch to avoid a pothole, we are here to help.  We’ll help you build the best vehicle for your journey, keep it tuned, and give you the best chance to arrive safely at your final destination.