It’s Different this Time…or is it?

Okay, the stock market is taking a beating. First things first, take a deep breath!  The sky is not falling…just meager snowflakes on this cold winter day here in Nashville.  I turned on the financial networks this morning to find the usual suspects spewing fear.  Run for the hills! Remember the talking heads are there to drive ratings. They are not there to give you personal financial advice!

As with all of the recent market downturns (and I say recent because I can effectively speak for 1990-91, 2000-2002, and 2008-2009 as far as personally experiencing them with a mature level of understanding), they all seemed different.  Yes, different can be scary, but it doesn’t mean the end result will be less predictive.

When the market slipped dramatically in late 2008, it felt different and drove many folks away from their investment strategy.  This turned out to be a mistake.  They feared that the market would collapse into oblivion, and they would lose their life savings.  That didn’t happen. Even though ‘08-‘09 was financially painful, the market rallied back and roared forward with 6 plus years of solid positive growth.  Unfortunately, those who sold at the bottom had a hard time recovering from their impulsive, fear-based decision to sell.

So, if history will repeat itself, which I am counting on when it comes to the market, we should learn from the past.  Matter of fact, we have had 14 recessions since 1926 (15 if you count 1926).  Guess what: the market is 15 and 0…undefeated!  The market has won every time.  After each recession, the market marched ahead past the losses and charged forward.  I wouldn’t be surprised if each recession “felt” different during the downturn.  But each recession ended the same: the market returned and moved forward.

While the market is down, we are not technically in a recession…at least not yet.  And that recession may not occur, but, if it does, we should know what to do.  The most important thing is to stay true to your investment strategy. For all my clients, we have a plan and a strategy. Part of the thought that goes into the strategy revolves around risk and knowing how much to take on.  We are now facing that risk (downside movement).  We didn’t develop a strategy that is based on bailing out of the market when risk increases. We didn’t develop a strategy that is based on an unrealistic unicorn and rainbow world that only produces positive stock market returns. We developed a real world strategy, and part of this strategy involves risk.

Let’s stay the course and learn from the past.  If Vegas played against the odds of the market, there would be no more Vegas.  So, again, I’m playing the odds with the market.  We may see some short term pain (I suppose we already have), but I still believe in the market and in our economic system.   So if you are looking for some tips to handle this downturn, here you go:

  • Abstain from the media – turn off the news
  • Continue to be a buyer- you’re buying at a discount and who doesn’t like to get a deal!
  • Be tax wise – harvest losses to save tax dollars or reset cost basis
  • Rebalance – this may be a good time to rebalance your portfolio if you haven’t done so in a while.

Before we all run for cover because we might feel the sky is falling, let’s keep things in perspective. History has given us a very solid dose of perspective in terms of the stock market.  So is this downturn really any different?



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