Good morning & happy Monday!
Fear is the foe of the faddist, but the friend of the fundamentalist.
Warren Buffett
Here’s the fundamental truth: history teaches us that stocks have been an incredible place to build wealth over time … but it requires patience, even when fear is prevalent. I know it’s easy to have a lot of fear and not a lot of patience in times like these.
At Intentional Wealth we do not chase fads, we choose to instead stick to fundamentals.
I’ll try to keep this brief today (hey, why are you rolling your eyes? 😉). One chart and 4 observations.
First, the chart: From 1926-2020 the S&P 500 was …
| Time Frame | Positive | Negative |
| Daily | 56% | 44% |
| 1 Year | 75% | 25% |
| 5 Year | 88% | 12% |
| 10 Year | 95% | 5% |
| 20 Year | 100% | 0% |
So, if we look at these 75 years of data it’s basically a coin flip on if the market will be positive or negative in any given day. The odds move to 3 out of 4 years positive when we look at a 1-year time frame. Obviously, looking at the chart, the likelihood of positive returns gets higher from there, including no 20-year period of time that returns have not been positive.
We are in the middle of some challenging economic times. Inflation, war, controversial government leadership, increasing interest rates, the Fed, etc. are all dominating the headlines and affecting our bottom lines. Which leads me to my 4 observations about market downturns:
- They are normal – looking at the chart above, it’s very clear that some seasons of the market are negative. It’s just par for the course. Are drops fun? No. But they are completely normal and nothing to stress about.
- They are natural – the value of businesses does not go up day after day, week after week, year after year. There are times when businesses (and their corresponding values) decrease. It’s totally natural and to be expected by investors.
- They are healthy – market pullbacks are part of the health cycle of business values. I actually get nervous when there’s not a healthy pullback from time to time. Just like a healthy child learning to walk is going to fall sometimes, a healthy market is going to pullback sometimes.
- They are temporary – this is the great news! History teaches us that market pullbacks don’t last forever. They last long enough to get inpatient people out of the market so that those of us who are patient can reap the rewards of company ownership through stock equity. To quote Warren Buffett a second time in this memo “The stock market is a device for transferring money from the impatient to the patient.”
Stay the course. Keep the faith. Be patient. This too shall pass.
My team and I are here are ready, willing, and able to provide any assistance we can. Please do not hesitate to reach out.
Make it a blessed week ahead 😊