Good morning & happy Monday!
Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in the corrections themselves.
Peter Lynch, investor
Last Wednesday, March 23rd, marked the 2-year anniversary of the Covid-19 induced stock market drop. The S&P 500 (representing the 500 largest publicly traded companies in the U.S.) closed on March 23, 2020 at 2,237.40, after dropping nearly 34% in 23 trading days (S&P 500 value on February 19, 2020 was 3,386.15).
The S&P 500 closed at 4,456.23 on March 23, 2022.
That represents a 99.17% increase from March 23, 2020 and a 31.60% increase from the February 19, 2020 at-the-time all-time high.
Please let that sink in for just a moment.
In 2 years the stock market, represented here by the large-cap index S&P 500, is up nearly double … and that does not even included dividends.
Have the last 2-years been a walk in the park? Hardly.
Let’s just take a walk down memory lane over the last 2 years. From March 23, 2020 to March 23, 2022 we have seen over 6 million worldwide deaths from Covid-19 (www.worldometers.com), racial intensity as high as I have seen it in my lifetime in summer 2020, a heated and contested presidential election, a storming of the Capital on January 6, 2021, a disastrous withdrawal from Afghanistan, inflation at a 40-year high, and Russia invading Ukraine and causing all sorts of trouble worldwide. Not exactly a recipe for a rip-roaring stock market, right? And yet, here we stand, 2 eventful years later with a stock market dramatically higher than it was 2 years ago.
The takeaway: headlines are not what drives stock market value … profitability of companies is what drives stock market value. As challenging as the events listed above were for all of us, that does not change the fact that businesses continued to work hard to generate profit for their owners (shareholders) during that entire period of time.
Two years from now will be late March of 2025 … there will be a completely different set of headlines that will dominate the news and much of our headspace … and yet businesses will continue to do what businesses are designed to do … make money for their owners. That’s what businesses are tasked with doing. No matter what the headlines are in the next 2 years ahead we can rest assured that companies will continue to strive to generate profits for their owners … and through stock ownership we can be the owners.
It’s been a crazy 2 years, thank you for allowing my team and I to be a part of your journey. No matter what the years ahead hold, please know we will continue to work hard to provide the best possible guidance each step of the way.
Have a wonderful week ahead!