• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Retirement Field Guide

Retirement Action Plan

  • About
    • About Ashby
    • Who We Serve
    • Contact Us
    • Disclaimers

The Retirement Field Guide

Home Link

The Stock Market and Predictions

by Ashby Daniels, CFP®

Predictably unpredictable and unpredictably predictable. This is the market in a nutshell.

The markets are predictably unpredictable because the market has a way of surprising the greatest number of people. Few people (nobody) saw the market returning 29% in 2019. I realize that’s a distant memory now, but it was still surprising, to say the least. Just as surely, nobody saw an economic shutdown caused by a global pandemic that resulted in the swiftest recession in stock market history. And maybe even more surprisingly, nobody predicted an almost immediate market recovery to follow.

The market has a way of surprising us on a regular basis. It is a long-term trendline up, punctuated by short-term and sometimes drastic, downturns.

We know this to be true and yet we continue to be surprised by it. The market is going to go through temporary downturns. On an intra-year average, the market falls about 15% each year and about 35% every four years. Those temporary periods can be paralyzing even when we know to expect these sorts of events. It is predictably unpredictable.

Yet, the market is also unpredictably predictable. We don’t know the path the market will take, but at least historically, we know the market has followed that trendline up and to the right.

Even if we look at two twenty-year periods that started with a flat initial decade, we can see that the market was remarkably resilient. Using the calculator, S&P 500 At Your Fingertips, from January 1968 through January 1988, the total return of the S&P 500, adjusted for inflation, was 2.85%. (Nominal return of 9.33%)

And from January 1999 through January 2019, the total return of the S&P 500, adjusted for inflation, was 3.46%. (Nominal return of 5.69%) -> Notice how the nominal return is much lower than above, but the real return is actually higher. This is why I tend to focus on real returns, not nominal returns.

The market is remarkably resilient in the long run. Or as I would say, unpredictably predictable. We don’t know the timing of it all, but it doesn’t mean we should lose faith when these short-term catastrophes begin to take hold of our emotions.

From where we stand right now, retirees now are starting to project ahead. Should we keep our market return expectations the same or should we back them off? What does that mean for your retirement?

I believe it is prudent to adjust your expectations. I am not saying returns in the future will be lower, but they might be. If they are, are you prepared? Do you need to work a little longer? Have you saved enough? If you choose to take some chips off the table, does that squander your security in the long-run?

There are many questions to be asked. What if a COVID vaccine doesn’t come around within a year and the waves of economic shutdowns continue? What then?

With the markets getting close to pre-COVID levels, now is a great time to stress-test your retirement income plan. If you are financially prepared for those short-term uncertainties, you may be less apt to react as the news continues to develop and beyond.

Stay the Course,

Ashby


If you liked this post, you can subscribe down below. 👇👇

This post is not advice. Please see additional disclaimers.

Filed Under: Investing, Retirement Income Planning, Retirement Planning

Primary Sidebar

Search Blog

Categories

Archives

Footer

Join the Retirement Field Guide Newsletter

Subscribe to get our “Preparing for Retirement: Seven Essentials for Successful Investing in Retirement” whitepaper!

We won't send you spam. Ever. Unsubscribe at any time.

  • This field is for validation purposes and should be left unchanged.

Follow us:

LinkedIn

  • 600 Waterfront Dr Suite 125,
    Pittsburgh, PA 15222
  • (412) 742-4861
  • Email Me

Large Map Directions

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact our office for information and availability. Retirement Field Guide and Shorebridge Wealth management are not registered broker/dealers and are independent of Raymond James Financial Services, Inc. member FINRA / SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James Corporate Privacy Notice.
FINRA BrokerCheck

Copyright © 2022, Retirement Field Guide. All Rights Reserved.  |  Privacy Policy  |  Design by Tinyfrog Technologies.

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
ACCEPTREJECT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via , ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT