As the world watches the horrific events unfolding in Ukraine over the past 24 hours, our thoughts are with those being tragically impacted.
The feeling of having no control over the lives of those in Ukraine, and everyone involved, can be overwhelming. And though we don’t want to minimize these feelings, our job is to remind our clients not to panic when it comes to their investments. As a result of such unsettling events, it can be easy for investors to slide into panic mode. Add to these broader geopolitical troubles the challenges of higher interest rates and inflation, and world stock markets have dropped accordingly. We know how worries like these weigh on investors’ minds. What is crucial right now is to put this news in perspective and shift our focus to your long-term investment plan.
The S&P 500 has dropped more than 10% this year, which is the technical definition of a correction. A bear market is defined as a 20%+ drop in the stock market. Since 1980, the S&P 500 intra-year drop has averaged 14%, so the market moves we are seeing now are not extraordinary. In fact, it’s very common and the long-term disciplined investor has always done well in times of stress. From WWI to the Cuban Missile Crisis to 9/11, history has shown that markets have always more than regained whatever losses incurred short-term, often far more quickly than predicted. The chart below shows in detail how markets since 1970 have reacted to wars, financial crises, even hurricanes, and every time we have witnessed short-term losses and long-term gains.
Our official advice? Hang in there, and take comfort in the knowledge that we are doing what we do best behind the scenes to protect what you’ve worked so hard to build. Below is a video explaining how rebalancing, tax loss harvesting, and other strategies we implement in your portfolio during volatile times can create long-term rewards as markets recover.