The financial markets have been making headlines this week, with sharp movements that might feel unsettling. If you’ve been watching the S&P 500, you’ve seen dramatic intraday swings—declines of 4-6% on several days, and even a one-day surge of 9.5%. At one point, the market was down 20% from its recent February peak.
While this daily volatility can be unnerving, it’s crucial to remember that true market “crashes”—events that fundamentally alter the long-term trajectory—are actually quite rare. What we’re experiencing now is a significant dip, but not without precedent. The scale of these moves is similar to what we saw during the early days of the Covid-19 pandemic and the 2008 financial crisis. Each time, the market eventually recovered, even though it was difficult to live through those periods.
Stepping Back: The Bigger Picture
Your financial plan is specifically constructed to weather periods like these. A cornerstone of our strategy is diversification. Your investments are spread across a mix of shares (ownership in companies), bonds (loans to governments and corporations), and other asset classes. This deliberate diversification means your portfolio isn’t entirely reliant on any single market sector. When one area experiences a downturn, others can provide stability and help cushion the overall impact.
For those nearing retirement, a greater portion of your portfolio is strategically allocated to lower-risk assets, such as government bonds. These investments tend to hold their value—or even appreciate—during stock market downturns, providing a crucial layer of protection when you’re closest to needing those funds.
Volatility Is Normal—And Recovery Is the Rule
Volatility, while uncomfortable in the short term, is an inherent characteristic of the market. History has repeatedly shown that markets do recover. In the last 70 years, there have been eight instances when the S&P 500 declined 15% or more in a 30-day period. In every case, the market recovered within 720 trading days (about 2 years and 10 months), with an average return of 50% at the end of that period.
While the timing and pace of recovery can vary, long-term investing remains one of the most effective strategies for building and growing wealth. Trying to time the market during these swings is often a recipe for missing out on the eventual rebound.
We’re Here to Support You
Periods like these can raise questions and anxieties. Please know that we are closely monitoring the situation and are here to provide clarity and support. In our next newsletter, I’ll discuss some longer-term concerns about the economy and investments, and how to mitigate them.
If you have any questions about your portfolio, your financial plan, or simply want to talk through the current market environment, don’t hesitate to reach out. We’re always here to offer reassurance and guidance.
Staying informed and maintaining a long-term perspective are your most powerful tools during times like these. Trust in the well-diversified foundation we’ve built together, and remember that we are here to navigate these market movements with you.
So, as always, keep calm and invest!