As you most certainly are aware, longer term economic effects of the global pandemic are now clearly evident in the financial markets. This past week witnessed renewed concern on various fronts with market indexes entering “bear market” territory. On one trading day, the S&P500 index had all of its 500+ stock participants trade in negative territory for the day.
There are many things to consider at times like this. In one form or another, we have been here before. In this context, it is important to remember guidance provided by some of the best investors of our time such as Sir John Templeton.
All markets involve human participation and we humans are pretty much wired the same as we were thousands of years ago. As said, we have been here before and we therefore should know how to behave in a manner which preserves our best interests. And we do know how, but quite frankly most people do not act accordingly.
We are here to help guide you through these difficult times. Your behaviour is and will remain the largest determinant as to whether your long term financial goals are met.
The chart below offers an excellent reminder of how in any given year, markets can and will fluctuate significantly. The BLUE lines represent annual calendar year returns while the GREEN dots represent the worst decline during a given year. The most important message is to not emotionally act when we experience a GREEN dot. This past week may just represent that GREEN dot for this year, time will tell. We just don’t know and no one can ever consistently time the market effectively. You will also notice that over time, there are always more positive years than negative years. For all our of clients, the results over reasonable time periods are even better since we never invest in the “market”, we only invest in well structured, professionally managed, diversified portfolios of the best businesses in the world.
As we have always messaged over the years, it has never been more important to stay the course with our longer term investment plans. We will continue to provide helpful, constructive and pertinent information.