By Karin Grablin
As we write this on March 9th, it is the 11th anniversary of the global panic attack that marked the bottom of the Bear Market of 2007-09.
Isn’t it a bit ironic that, on this anniversary, we are marking it with another global panic attack?
The S&P 500’s opening level today (2,764) is down over 18% from its all-time high, which was achieved less than a month ago, on February 19th. Over the last several decades, declines of this magnitude are fairly common: the average annual drawdown from a peak to a trough since 1980 is close to 14%.* What makes the current decline noteworthy is not its depth, but its suddenness.
As we all know by now, the following events have led to this decline:
• the outbreak of a new strain of virus, the extent of which can’t be predicted,
• the economic impact of this outbreak, which is equally unknown, and
• most recently, the beginning of a price war in oil (a problem for those in the oil business, but great for those of us who consume it.)
The common theme for this market volatility is the unknown: we simply don’t know where, when or how these events will play out. It’s been our experience that what markets hate and fear the most in this world is uncertainty. But we have no control over these uncertainties. What we can and should have perfect control over is how we respond to it.
Or we can choose not to respond at all. Why? Because the last thing in the world that long-term, goal-focused investors do when the whole world is selling out of their investments is – you guessed it – sell their investments. If fact, those same goal-focused investors usually figure out a way to push cash to work instead.
Just last week, 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 19th.” Today, when they’re down 18%, that statement is even more true.
Relax, stay calm, and keep your spirits up. This crisis too shall pass.
*JP Morgan Asset Management’s Guide to the Markets, page 13. Data as of as of December 31, 2019 .