The Mental Approach in Miserable Markets

To our clients and associates,

Investing in downward markets is a difficult endeavor. It inherently requires the gumption to stay invested in the face of uncertainty with the hope for positive resolutions on things inherently out of our control.

Investors have felt these dynamics many times throughout many generations. The Great Depression of the 1930s, WWII in the 1940s, Cuban Missile Crisis of the 1960s, The Great Inflation of the 1970s, The Cold War of the 1980s, Tech Bubble of the 2000s, The Great Recession of the 2010s and here we are now, COVID and Inflation for the 2020s.

Each of the previous decades gave you plenty of reason to doubt a positive resolution and each time, the market reflected this fear in the form of a sell off. Currently concerns of COVID and inflation now have led to a 25% selloff in the S&P 500 through the end of September. There have been 9 times since the 1950s that the S&P 500 has fallen more than 25% and the chart below shows what happened after each downturn over various timeframes:

Prior to this year’s selloff, the market was at an all-time high. In other word, the inflation and economic concerns of today are quite literally the only concerns in history that have not yet been followed by a new market high. While future returns are never guaranteed, I would expect that when we look back on the decade of 2020 the lesson will be the same: Those who maintain the gumption to stay invested in the face of uncertainty have been the ones to reap the rewards of the markets.

Wishing you good health!

Matthew Corthell

Past performance is not indicative of future performance. Loss of principal and/or loss of portfolio value are possible.