Just over a year ago, this very column made a strong argument against selling stocks. We hold this same sentiment today.
Surprised that we wouldn’t go back and do things differently?
A quick recap: June 23, 2021, the S&P 500 stood at 4,241, the Dow Jones Industrial Average 33,874, and the Nasdaq 14,271. In the following months, they would each reach new heights. COVID-19 stimulus and Fed rate cuts did what we expected, and consumer spending grew. By the same token, unemployment dramatically improved through the following year, leaving many businesses struggling to fill open positions.
You may be asking, “Are you sure you wouldn’t have sold at some point?” Have you seen the market lately?”
Absolutely. Today, we are well off the market highs, in what is known as a “bear market.” Through the end of the second quarter, the S&P 500 is down around 20%, the Dow down 15% and the Nasdaq a whopping 29.5%.
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Consumer sentiment is near lows not seen since 2008. It is more expensive now to buy a home or car than it has been in some time. The word recession is more common than not. From the outside looking in, it would be hard to paint a rosy picture for the market in the near future.
I’ll stick with stocks, nonetheless.
Historically, this is nothing new. We’ve been through bear markets before. One could argue this is a healthy part of the market cycle. Headlines espousing fear are also nothing new, and I doubt they’ll go away in my lifetime.
We’ve often written of “walking around sense,” using your own experience to inform your thoughts on the situation. When I look around, I see job openings. I see new vehicles in driveways. I see full grocery stores and more delivery vans than I can count.
As investors, it is easy to be caught in the here and now of the market. We have 24-hour business news channels, constant reminders in our pockets and no shortage of ways to be fed every detail, every day. Don’t get caught in that habit. Zoom out.
Do you remember January 2020? That time before masks, hand sanitizer, and social distancing feels like a lifetime ago. Looking back on your investments at the time, you may be surprised to know that they are worth more today than they were then.
If you follow our philosophy of owning high-quality, dividend-paying companies, then you’ve received a steadily increasing paycheck as well.
The market will go up and down every day, zoom out and watch your investments grow over long periods of time. Have a plan, execute it, and stick to it. Investments are only one piece of your financial picture.
Patrick E. Gauthier is a senior portfolio analyst for CPS Investment Advisors in Lakeland.