Somewhere Over the Rainbow

Chad Winn |

Somewhere Over the Rainbow.


In the Wizard of Oz Dorothy finds herself picked up in tornado, spun around, and dropped into a strange land.  As I’m sure you all know, she meets some great friends (and some enemies), faces some high points and low points, but finally makes it home safe and sound.  Sometimes being invested in the stock market may feel like you, your house, and your little dog too, are falling from the sky.  But, just like Dorothy if we hold on, follow the path laid out for us, and have faith, we will all get home safe and sound.  And, unlike Dorothy who had never experienced such a storm before and had no idea what to expect, we have history to guide us. 

When the market gets tough (and let’s face it 2022 hasn’t been a fun time so far) I like to use history as a little bit of a warm, cozy, security blanket.  Since I started my career, I have experienced along with my clients five bear markets (market decline of 20% or more) and many market corrections (declines of at least 10%).  We’ve kept our cool, followed the path, and got back home safe and sound, surrounded by our loved ones. “……and you were there, and you were there, and you were there….”

I'm hoping the current correction we find ourselves in doesn't develop into a bear market but if it does, its not all that uncommon historically speaking. If you remember way back to February 2020 the market declined a little over thirty percent.  That bear market only lasted a few months. On average bear markets result in an average 36% decline.  But they occur less often and are much shorter than bull markets.  In fact, the market rises 78% of the time and the average length of a bear market is about 9 months.    Something else to keep in mind, over the last 20 years half of the S&P 500 index best up days occurred during a bear market and another 34% occurred in the first 2 months of the newborn bull market. 

So, although market corrections and bear markets are painful and stressful, often the best course of action is to stick to the plan, stay on the yellow brick road.  If your income is sufficient and if you have enough cash on hand to feel confident and pay for unforeseen emergencies, then try to stay focused on your long-term plan and not the day-to-day volatility. Somewhere over the rainbow better days are ahead and in the meantime, I'm always here to talk.