I don't make market predications. I don't think I can predict the future any better than you can. That doesn't mean I never look at the markets. I just tend to look at them historically and keep in mind that while this time feels different, it likely isn't that different than what has happened in the past. So, let's take a quick look at some history. On average...
The US stock market declines 10% every other year
It loses 30% every 4-5 years
It declines 50% once a generation
The S&P 500 is down 12% so far for 2022. It's been up the prior 3 years. And, for what it's worth, for the trailing 12 months (June 21 - June 22) the S&P 500 is down 0.74%, which doesn't sound too bad. So, what is going on at the moment is to be expected.
We can also take a look at how long downturns endure (from peak to bottoming out). Going back to the great depression:
We've had 6 bear markets that lasted 5 months or less.
There have been 5 bear markets that lasted between 17 and 31 months
Finally, the longest bear market was during the Great Depression which lasted 33 months
What to make of it all? I think the best thing to do is sit there and do nothing. Actually, what I really mean is stick with your plan (and I'll help you with that). If you're making periodic contributions to a retirement account, don't stop. If you have a plan for strategic rebalancing of your portfolio, rebalance when you hit your guard rails (which we'll be doing). What it really comes down to is timing the market is really hard. You have to figure out when to leave and when to get back in. Both are hard decisions. Imagine if you had gone to cash during the March 2020 crash. Even after this year's correction, the market is still higher than it was then. So, stay the course and remember time in the market is more important than timing the market (I know, that's an old one).
If you found this article useful, you might like the following blog posts:
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.