Sometimes it is helpful to take a step back and look at the big picture, and that is probably truer about investing than any other aspect of our lives. We know that many of you are experiencing anxiety and angst about the markets’ performances this year. We understand that – the fear of loss is more powerful than the joy of gains. No one was worried last year when the record-setting highs were made in the equity markets. This year is ‘reversion to the mean’.
The ‘little’ picture is what happened yesterday, or last week, or the first or second quarters of the year. The big picture is something quite remarkable: the long-term trajectory of stock values, which are the result of millions of people coming to work every day to add value, incrementally, day by day, to their companies.
The chart shown here not only gives you the big picture of S&P 500 index returns since the 1920s—the result of all that labor—but also shows, in the gray vertical bars, how few downturns we have experienced compared with times when the markets were rising. Investing in the U.S. stock market has risks, as does gambling. However, it is more like putting money down in a casino where the odds of winning, over time, greatly exceed the potential for losses.
Focusing on the ‘little’ picture is natural and normal—and tends to lead to making decisions that are not ideal in the long run. If you walk into a casino where the odds are in your favor, a short run of bad luck shouldn’t discourage you from continuing to play.
Such is the place we find ourselves. We can write pages of reasons why markets are where they are. But no one really cares about why – they want assurance that they won’t go broke.
We cannot tell you when it will end. But history shows that it will.
Please know that we are here for you. Thank you for the patience, trust, and confidence you place in us. It is something we never take for granted and sincerely appreciate. Please do not hesitate to reach out whenever you have questions, concerns or whenever we may be of service to you.
Joe Downs, CFP® & John Cunningham, CFP®