How Can I Keep Market Losses in Perspective?

The recent stock and bond market turbulence is enough to leave anyone feeling anxious and whipsawed.  The last thing that we want is our clients to feel stressed about their finances.  Frankly, there are enough other things to worry about.

One thing we’ve learned from decades of experience is that timeframe is important.  Both stocks and bonds may be lower in value today in relation to where they were at the beginning of this year and even one year ago. But, it’s probably safe to say that  most of our clients have been investing longer than that.  If you’ve been an investor for the past two or more years, there’s a strong likelihood that your accounts are still net positive.  And the longer you’ve been an investor, the greater your potential gains.  

We remember hearing pundits sound the alarm bells as early as 2017 about how high the market was and that it couldn’t possibly go on.   Yet, the U.S. stock market has grown tremendously over the last 5 years.  

Take the Dow Jones Industrial Average for example, since that’s a common benchmark.  As of market close May 5, 2022, the Dow sits at 32,997.97.  It was an ugly day where the Dow shed more than 1,000 points.  But if we compare this to the May 5, 2017 close, which was 21,006.94, the index is still some 11,991 points higher.   The Dow would have to lose an additional 36% before getting back to that level.  Now that we’ve grown accustomed to the Dow at 30,000+, it’s hard to remember when the Dow was at 20,000 (a major milestone not that long ago).  

It’s easy to get side-tracked on negative, short-term performance, especially when watching account balances drop from their peak levels.  But, it’s much more important to remember – and be thankful for - the incredible growth we’ve experienced in recent years to help keep these losses in perspective.