Hold Steady: now is when we earn our long term returns

The Markets are Struggling

Most of you know that I only send out mass emails from time to time as needed. You’re all busy, and so am I, so I try not to spam people.

But lately, I’ve been getting some questions about what’s going on in the markets. Your guess is as good as mine. There’s really no way to know for sure what’s going to happen in the short term. But history gives us some clues about what’s likely to happen next.

TLDR: My suggestion is to hold fast and don’t panic. Now is the time, if you need to, to stop reading the news and go do something else. I don’t believe anyone can reliably forecast the stock market’s short-term gyrations, and if someone could, they sure wouldn’t tell anyone!

When in doubt, hold firm to what you know to be true

The chart above illustrates a key thing we know to be true. The longer the time horizon, the more the stock market has historically risen. Right now, we’re slightly down over the last six months. But the downturn won’t last forever, and now is the time to earn our long-term positive stock market returns - by doing absolutely nothing. Sometimes we forget that there is a price to pay for the long-term positive returns we get from the stock market: volatility. And unless you need the money right now, it’s only emotional volatility.

BlackRock CEO Larry Fink addressed this in his annual letter recently:

“We are living through a period where things that would’ve defined a decade have become routine: wars with global repercussions, trillion-dollar companies, a fundamental reordering of international trade, and the advent of the most significant technology since, at least, the computer.

...over time, staying invested has mattered far more than getting the timing right. Over the past two decades, every dollar invested in the S&P 500 grew more than eightfold. Miss just the ten best days, and you would have earned less than half. And some of the market’s strongest days came amid the most unsettling headlines. The danger is that we focus so much on the noise that we forget what actually matters.”

Hang in there, and remember that now is the time to play the long game.