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April 30, 2019

When Things Get Crazy


Spring 2019 Quarterly Newsletter

Author: Marty Moore, CFP®

Estimated Read Time: 3 minutes 


As they surely do from time to time and surely did by the time Christmas Eve came around last year, the S&P 500 was down 20% (19.8% to be exact) from its recent high on September 20th.  Since that time the market has climbed strongly up to about 12% as of the end of the first quarter and is up about 18% as of April 26th.


Here are some thoughts about the quick, sharp decline in the fourth quarter of last year or any 20% drop for that matter (past or future).


The biggest factor affecting the markets day to day and over short periods of time is investor emotion.  Emotions don’t care about corporate earnings, economic growth, valuations and other market metrics.  These things certainly do matter over the long term, but mean little when investors begin indiscriminately selling.


Daily financial headlines often report, “The market declined due to…”  Simply know that it generally means nothing and there is little, if any, usefulness to it.  This can also be a bit amusing.


We recognize that it’s easy to say you are amused and to ignore what’s going on each day, but harder to practice in reality.  Our emotions are real and they just don’t always allow us to turn away and ignore what’s going on in the moment.  Yet if you’ve set realistic expectations ahead of time, understand the degree to which your investments can move up or down over short periods and have developed an investment approach that is tied to and targeted toward pursuing your financial goals, then it makes it easier to deal with the craziness.


In a way, there are three (legal) investment strategies: You can be smarter than most everyone (are you?), you can be luckier than most (good luck with that) or you can put in place a long-term investment plan that has been tailored to your specific situation and financial goals.  Investing without a plan relies on being smarter or luckier.  Investing within the context of a goals-based financial plan provides you with an edge.


John Bogle, the founder and chief executive of The Vanguard Group who recently passed away at the age of 89, once said, “Time is your friend; impulse is your enemy.” He is also quoted as saying: “I’m 50% bonds and 50% stocks. Half the time I wonder why I have so much in stocks; the other half I wonder why I have so little.”  There is a lot of meaning and wisdom in these quotes, both of which speak to the emotions of investing.


Every past decline looks like an opportunity, every future decline looks like a huge risk.


Your lifetime results as an investor will mostly be determined by having an investment plan based on your financial goals and by what you do or don’t do when things get crazy.



Required Disclosures:

  • The S&P 500 Index is a capitalization-weighted index made up of 500 widely held large-cap U.S. stocks in the Industrials, Transportation, Utilities and Financials sectors.
  • The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with or without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.
Market Update, Market Volatility

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