Damn, it keeps going down!
Recent weeks have brought pain and suffering to both investors and their portfolios. By how much depends on what time frame one looks at and what indexes.
It’s safe to say the latest statements from your advisor or brokerage firm for most investors may have been pretty ugly.
The whole mess started right around February month-end and continued almost without respite for two solid weeks. We had a little bit of encouragement Friday the 14th, but we have to see whether that holds or if back down we go.
Continuing inflation expectations along with new tariffs and the threats of more have dampened investor enthusiasm.
Many investors may have seen their balances fall more than they have in a long time. To put it mildly, the selloff has been relentless.
There were very few bright spots. Gold held its own and is pressing up against new highs but Bitcoin didn’t fare so well. Even bonds got hit, which makes this recent sell off a bit rarer than most.
Whereas the run of the mill stock correction usually leads to bonds rising in price, when the bloodletting bleeds over to the bond market and bonds fall in concert with stocks, it means it’s getting more serious.
When market routs cause you to wring your hands and furl your brow as you see balances drop, remember that markets never go up in a straight line. It’s more like a stair step pattern with an occasional steep drop here and there.
The question becomes WILL it stop or will it go down forever. Although going down forever in reality seems a pretty foolish prognostication, the mind wanders that when you see hard earned money evaporate.
The evening news anchor and your financial advisor will offer up a calming voice and reminders that markets always come back. But that can be little comfort as money evaporates day after day.
Advisors are not allowed to say what markets will do nor offer any guarantees of any sort outside of FDIC insured products. But even FDIC insured products like bank accounts and Certificates of Deposits are guaranteed by a Federal Government entity and not the advisor.
Advisors offering any guarantees on market direction may be in violation of regulations that prohibit such statements. But in a weird way there seems to be an exception.
In my half century or so of being in the business, I have heard probably thousands of statements by licensed professionals everywhere that the markets always come back. Regardless of the exact words used, the inference, or should I say the insistence is, that markets will always continue to rise and surpass previous highs given enough time.
Although the regulations are clear that offering any guarantee or even stating the markets “always” comes back is an implied guarantee by using the word “always”, this seems to be an exception. Simply put, the idea that the market always comes back and stating that draws no ire from authorities that I can see.
I think the idea and the permissions to say such a thing comes from the historical fact that if one looks back at the history of the Dow Jones Industrial Average and indeed, all the other stock markets like the NASDAQ, the S&P 500, the Russell and all the other exchanges, they are indeed higher than they were at inception, no matter what that inception date may be.
It is an historical fact that the markets HAVE always come back. But “HAVE come back” does not technically allow us to say “WILL come back”. Remember “past performance is no guarantee of future results”.
Sure, I am splitting hairs here, but it’s odd how licensed financial professionals and even the news outlets are allowed to say such a thing that is obviously an implied guarantee and prognostication that is in direct violation of any regulation that prohibit such statements.
That said and using the reasonable man theory, which means lets be reasonable here Marc, historically the markets, at least OUR stock markets, have always come back and gone higher over time.
What is also important however is how LONG it might take to do so.
Consider that most markets did not recover fully from the 1929 stock market crash for close to a decade, and it took 15 years for the NASDAQ to recover from the DOT.COM 2001 crash. I know they say for us to hold for the long term, but I really don’t know how much LONG I have left in my TERM.
In conclusion, we never really know what lies ahead in the stock market. No one does. The market COULD recover tomorrow, next year, in ten years or even never recover.
After all, anything is possible right?
That said, it’s best to plan for all possibilities and never rule anything out. But the way I see it, the markets will eventually get it together and start to rise again.
How long that takes however, is another thing all together.
“Watching the markets so you don’t have to”
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(As mentioned please use the below disclaimer exactly) THANKS (Regulations)
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249 His insurance agency is BAP INC. insurance services. Email: news@moneymanagementradio.com
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