I’m writing more frequently these days because I think a lot of you need some encouragement and some hand-holding – some good, old-fashioned reassurance.
It looks like the nastiness of last week is continuing into this week. I’m sorry. I can’t help the news. But I hope this posting may help you with your response.
Earlier this morning, the S&P 500 futures were down 26 points. Yikes! that’s another one percent. But as of about 9 am this morning, they were down “only” 10 points. That’s progress, but it’s still going to hurt. Let’s see how the day goes. The markets close at 4 pm EST A lot can happen by then. Last week showed markets opening better than they closed. In other words, their mood soured during the day. That often happens in corrective phases.
But lets put this downdraft, correction, adjustment, or whatever we want to call it in perspective. Study the chart below from Doug Short:
Study it carefully. Some love charts and take-in their message immediately. Others get sweaty palms thinking they’re about to take a math test.
Note two things, please. First, notice the overall slope of the S&P index line from early 2009 until the present. It is, clearly, upward sloping and delightfully profitable to any who rode its progression. In fact, that total “progression” works out to be 324.6% – somewhat better than the best CD rate you could have had from the bank near you.
However – second point – unlike the CD rate from your nearest bank, the 324.6% return came with a series of untimely, unpredictably downdrafts that chopped off anywhere from about 5% to 20% of what you had already “progressed” through.
Moreover, on the left of the chart, you see the frightening tail-end of the 2008-09 monster bear market wherein almost 57% of your prior returns had been lopped off and sent to the dumpster. (Somewhere in there, many of you might have gotten out of the market. Are you back in yet?)
One never knows when the next downdraft will come nor how deep it will go nor how long it will last, but the worst ones are usually attended by or come just before recessions. With corporate earnings growing as they are; with corporate revenues doing well too; with so much else – still low interest rates and inflation, improving unemployment, less regulation, lower taxes, and much more – the prospect of a recession is tiny right now. That does not mean that there will be no more recessions – there will be – or oil price rises, or geo-political shocks or just bad stuff happening, no; all that will keep on happening in this broken and fallen world. BUT! as an investor, you and I can control only what I can see or reasonably expect, not every single remote possibility out there. To try to control everything, I would wind up in a nut house or I’d wind up putting my money in the ground in my back yard.
Look at that chart again. Try to absorb its comforting, reassuring message about where we are, where we’ve been, and what is not unlikely to be ahead for now. Don’t focus on an invasion from Mars or a nuke from North Korea hitting LA or the next earthquake under San Francisco. Neither you nor I can control those things; we can control only what we can. So, my advice, for now, is to stay invested or get invested.
God bless you, my friends. I’ll have more helpful, encouraging charts for you later this week, if things continue to test our fortitude. For now, keep you chin up.
This, too, shall pass. (And please, stay away from cable, financial news right now.)