Calm in a Sea of Volatility
posted on Wednesday, April 29, 2020
The world has seemingly shifted right before our eyes, and at a speed which sometimes requires decision making without having all the information we would normally like to have. But these are not normal times; not for work, not for school, not for travel, not for investing either.
People are hoarding things they think they may need. Disinfectant wipes, toilet paper, etc. Stress effects everyone differently and some people just feel compelled to do something, to take some action, and to worry about the results of those actions later. Do you really need a case of tuna fish cans? If they were on sale, then maybe. But I very much doubt you will be wanting to eat canned tuna if you are sick. Maybe chicken noodle soup. Maybe.
Since 1900 there have been 22 times when the stock market has fallen by 20% or more. During this current trip south, stocks have fallen by about 35% from the top, and no can say for sure if we have already hit bottom. What we can say is that the government and central bankers are throwing everything they have at the problems of the moment to try and stabilize the markets.
In 1900 the Dow Jones Index traded at 52 points. In 2000 that number was 10,729. That’s about a 5 ½% growth per year on average for 100 years. Wars, depression, good times and bad. Add in dividends of about 3% and you get total returns of 8 and a half percent per year, despite having about 20 different times when the market fell by 20% or more! Remarkable, but fact based.
Don’t ask me where the market will be in a month from now because I have no idea. Nor does anyone else. I do know that most people like buying things on sale. Take Kohl’s for example. The stock was recently down 82% from its high. My kind of thing to hoard. What else is worth hoarding in these turbulent times? How about hoarding an ultra-low mortgage rate or auto loan? How about hoarding the good will of your neighbors by seeing if they need anything?
Stay calm. Stay healthy. Ask questions. Use your resources to help others. Continue to dollar cost average into your 401k and re-assess your plan as time goes on. And remember BankORION has seen quite a few financial storms since 1890 and withstood them all!!
- investment advisor