Feb 15, 2022

Navigating Icy Waters

Written by: Mike Antonelli on 2/15/2021

By now you’ve probably seen that the stock market is off to a rough start.  It’s always uncomfortable when we are in periods of uncertainty and it’s a good reminder that selloffs have always been a part of investing.

The S&P500 is down 8% year-to-date and was down 10% the first 15 days of the year. Is that the fastest selloff to start a year ever?  No, in 2009 we managed to fall 10% in 12 days, but it’s in the top 5.

Why the selloff?  There’s never one reason, it's usually a combination of a few things.  The federal reserve is set to tighten rates, the stock market is up significantly over the past three years, and large “growth stocks” are undergoing a correction.  That being said, there’s always a reason to sell, click here and you’ll see what we mean.

Here’s the thing though:  market selloffs are just part of the game.  We should be expecting a 12-14% selloff every single year, we just haven’t had one in a while.

The last selloff greater than 10% was the crash in March 2020.  Can you believe that?  It’s been unusually calm.  It’s like going a month without snow in winter, we know it’s eventually coming and when it happens it ruins our day.  But we shovel the snow and continue on.

Investing is a lot like life, there are good days and bad days with both being part of the journey.  Take a look at this image, it really captures what we’re trying to say.

 

 

In order to reach the peaks we have to travel through a few valleys.  If you understand that, and persevere, you can reach fantastic heights.

We never want to jump in and out of the market based on fear.  If we do that, we are only increasing our chances to be wrong.  Good investing is about mistake management more than trying to be perfect.

All the best investing, the kind that builds real wealth, boils down to two things:  patience and time horizons.

Our friend Michael Antonelli wrote a fantastic piece about how you should think about the market right now and who the big winner was from the last selloff (hint, you and me).  Go read it here.

We know things seem crazy right now, but we want to remind you that the plan we have built you IS the lifeboat. Don’t abandon it and jump out into icy waters.

The advisors at Baird Retirement Management are always here to talk.

 

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