Do you remember the stock market late in 2018? Let me remind you…
The graphic above shows the last quarter of 2018 - a roughly 14% decline in a relatively short period of time. The peak to trough decline was closer to 20%. There were a litany of scary headlines about President Trump lashing out at the Federal Reserve, the slowing of corporate profits, how the trade war was impacting global growth and a partial government shutdown thanks to squabbling over border wall funding.
As if those weren’t enough, perhaps the biggest bombshell released was when Treasury secretary, Steve Mnuchin, announced that he held calls with the CEOs of six major banks to ensure their operations were running smoothly and that they had “ample liquidity available for lending.”
Given the depths of the Great Financial (Panic) Crisis that occurred, this one shook some people. And as usual, it shook many people at the exact wrong time as the bottom of this all too normal (and expected) pullback was Christmas Eve. Anyone who heeded all the above “warning signals” and ducked for cover was almost immediately mistaken.
Here’s what has happened since the Christmas Eve stock market bloodbath of 2018.
For those counting, that is more than 37% return since Christmas Eve of 2018, not even including dividends! In 2019 alone, the market returned about 29%!
That is the fourth-highest return in the last 40 years.
There is much more that could (and maybe should) be said about this topic, but the long story short is:
Nobody saw this coming.
Nobody know what’s going to happen (good or bad), no matter what they say.
We must simply exercise faith that the people leading the enterprises we choose to invest our hard-earned money into are going to make the best decisions possible with the information at hand to continue a profitable enterprise. No government, nor policy, nor anything else can stop this from happening.
Much like we try to make the best decisions for ourselves and for our families, these business leaders do the same for the capital that is entrusted to them. They can choose to hold their capital for future investment, spend it on research and development, acquisitions or other things, or distribute it to shareholders.
Watching the news does not make us educated investors. It provides the feeling of knowing what’s going to happen next which may be more dangerous than anything else. Because nobody knows. Despite the forecasts already being presented for 2020, nobody knows what going to happen this year either.
Be prudent. Be sure your portfolio is aligned with your needs and goals and lean on the faith that everything will work out. We can’t do any more than that anyhow.
This post is not advice. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results. Raymond James is not affiliated with and does not endorse the opinions or services of independent third parties named. Please see additional disclaimers.