It’s Just the Road

Road through a field of yellow grain

In the last few days stocks have taken a beating.  Volatility has finally returned after a near two year hiatus.  Friday February 2nd saw the largest single one day drop in the Dow Jones Industrial Average history.  The following Monday (Feb. 5th) 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.

Source: First Trust Portfolios

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.

Source: First Trust Portfolios

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.

Brannon Brown

Brannon is a financial advisor with LPL Financial and also serves as the team’s wealth manager. He joined Prosperion Financial Advisors in 2004. In addition to being a Certified Financial Planner® (CFP) and an Accredited Portfolio Management Advisor®, Brannon has a Master’s degree in Leadership from Denver Seminary. He is passionate about helping clients make wise, informed, investment and financial planning decisions. He is married to the love of his life, Melanie, and is the proud father of his son, William. When not working with clients or spending time with family, Brannon enjoys being in the outdoors of the Colorado high country, skiing, fly fishing, and exploring wild country.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.
All performance referenced is historical and is no guarantee of future results.
Economic forecasts set forth may not develop as predicted.
All market indexes discussed are unmanaged and are not illustrative of any particular investment. Indexes do not incur management fees, costs and expenses, and cannot be invested into directly.
Investing involves risks, including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.