Today – March 9 – is the eleventh anniversary of the peak of global panic that marked the bottom of the bear market of 2007-09.
How Ironic that the world has elected to celebrate this iconic anniversary with – you guessed it – another epic global panic attack.
At this morning’s opening level of 2,764, the S&P 500 is down over 18% from its all-time high, recorded on February 19. Declines of that magnitude are fairly common occurrences – indeed the average annual drawdown from a peak to a trough since 1980 is close to 14%. * But such a decline in barely a month is noteworthy, not for its depth but for its suddenness.
As we all know by now, the cause of this decline has been (a) the outbreak of a new strain of virus, the extent of which can’t be predicted, (b) the economic impact of that outbreak, which is equally unknown, and (c) most recently, the onset of a price war in oil. (That last one is surely a problem for everyone involved in the production of oil, but it’s a boon to those of us who consume it.)
The common thread here is uncertainty: we simply don’t know where, when or how these phenomena will play out. And in my experience, the thing in this world that markets hate and fear the most is uncertainty. We have no control over the uncertainty; we can and should have perfect control over how we respond to it.
Or, ideally, how we don’t respond. Because the last thing in the world that long-term, goal-focused investors like us do when the whole world is selling is – you guessed it again – sell. Indeed, I welcome your thoughts around the issue of putting cash to work during this buying opportunity.
On March 3, billionaire investor Howard Marks wrote, “It would be a lot to accept that the US business world – and the cash flows it will produce in the future – are worth 13% less today than they were on February 19.” How much truer this observation must be a week later, when they’re down 18%.
Know that your Nickels Wealth Management team remains steadfastly committed to you, your plan, and your success. We fully understand that times like these are scary. Please don’t hesitate to reach out to us at any point
Hang on tight. This too shall pass.
Best,
Bain
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk including loss of principal.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.