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Alexander and the Bumpy, Volatile, No Good, Very Bad Market Out There

Keel Point

September 29, 2022

Barron’s said in their Monday edition this week, it’s a “bumpy, volatile, no good, very bad market out there.” A clear reference to the popular children’s book, “Alexander and the Terrible, Horrible, No Good, Very Bad Day.”

As the story goes, each page involved something that didn’t go young Alexander’s way to the point where he was wanting to go to Australia. At least he threatened it twice! And as the day progressed, the hits just kept coming all the way up until it was bedtime. At which point, Alexander admits “My mom says some days are like that….Even in Australia.”

Alexander learned a valuable lesson early on from his mom, and this life lesson translates to investing, as well.

We’ve been here before

The market is certainly no stranger to volatility. In fact, volatility is the market’s friend. One could even argue they are best friends. While it hurts in the moment (like gum in your hair or tripping over your skateboard), without the uncertainty – and likelihood – of market returns going down, the market would not produce the long term returns we’re accustomed to. On average we experience a bear market (measured by being down 20%) about every four years, while a 30% decline occurs around every nine years. Despite these drops, the S&P 500 (including dividends) has annualized more than 10% over the past 50 years. In other words, the declines are the price you pay to achieve the greater long-term returns. As this chart by First Trust depicts, the good times far outweigh the bad.

Be careful who you listen to

Fortunately for Alexander his mom was realistic and encouraging. Unfortunately for most investors, the words heard are pessimistic and negative. Every day will be as “no good” as the last and there is only “horrible and terrible” ahead. This is how modern-day media works. Clearly this can create negative emotions – stress, anxiety, and even panic that leads to investing decisions later regretted. Dr. Daniel Crosby, a clinical psychologist and best-selling author on Behavioral Finance, provides some tips to help us discern between “Noise and Information”. Additionally, if you are concerned about what you’re hearing and it is causing anxiousness, please call us so we can discuss together. Your peace of mind is of upmost importance to us and most often, we can identify the news as “noise.”

Remember your Why

Imagine you’re setting out on a long trip for a family vacation. You’ve done all the preparation – you’ve got your itinerary, you’re all packed up, prepared for the length of the trip, and you set out. A few hours into the trip, though, you run into stand still traffic. While you certainly didn’t expect it, you knew it was a possibility. There’s no detours or shortcuts, so you’re stuck, and your ETA is set-back considerably. This kind of situation can have you thinking like Alexander as minutes turn into hours and kids are becoming restless. You may look for detours or short-cuts to get around the traffic but there are none, unfortunately. Surprisingly, the navigation apps have no idea on the time this will take. At this point, you’re really beginning to feel like Alexander. But will you pull a U-Turn, go back home, and cancel the trip? No way, you’ve got a family vacation to enjoy! As with investing, stand still markets that delay your goal arrival, can be very discouraging. By remembering where you’re going, your why for investing, it can help you to patiently endure the down markets that are expected on the road to achieving your financial goals.

 

As always, no matter the market environment, we are committed to guiding you along the way to help you harness your wealth to live with peace and purpose.

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