This Week’s Blogger: Scott D. Heins, CFP®, IAG Chief Investment Officer

Do you remember where you were eight years ago from last Thursday?

More importantly, do you remember your portfolio’s performance between January 26, 2018, and February 8, 2018?

Likely not. It was not pretty.

On January 26, 2018, the S&P 500 Index reach a record high of 2,872.87. Just nine short trading days later, it had fallen over 10% from its lofty perch. Let me know if you have heard this before, but the quick downdraft was generally attributed to concerns over inflation and interest rates. Here is a quick update from Reuters reporter Lewis Krauskopf dated February 5, 2018:

“U.S. stocks plunged in highly volatile trading on Monday, with both the S&P 500 and Dow Industrials indices slumping more than 4.0 percent, as the Dow notched its biggest intraday decline in history with a nearly 1,600-point drop and Wall Street erased its gains for the year.”

There is never much to celebrate in the midst of such moments.

While traders live in the moment-to-moment excitement of fickle headlines, investors think in multiples of years knowing that the headlines of today are gradually covered by the sands of time.

Thus, your jarring memories of a 10% plunge over 9 volatile trading days eight years ago simply do not exist. Not that they were never there in the moment, but that they did not matter to you over time.

In the intervening eight years we have experienced four additional drawdowns of over 10% from record highs, including a harrowing 35% over 30 days in February and March of 2020. These were fear-inducing moments for traders, one and all.

As investors, our simple, stoic observation is that all of traders’ moments of fear and greed over the last eight years cumulatively resulted in the S&P 500 unevenly rising to close at 6,932.30 on Friday, February 6 – eight years since the first 10% tumble of 2018.

Even the most casual of math observers can tell that 6,932.30 is significantly higher than the momentary pain that 2,872.87 inflicted a mere eight years ago. And all it took to benefit from this math was the dynamic compounding combination of patience and time.

Where will you be eight years after the next unscheduled, unpredictable market meltdown?

More than likely, you will once again be unable to recall the specific momentary fears that captured traders’ minds and temporarily deflated your portfolio value eight years previous.

In the moment of the next downturn, counterbalance the apocalyptic headlines with appropriate doses of patience and time. The potential results of long-term rational thought will likely impress you.

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Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG), a registered investment advisor and separate entity from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. The Dow Jones Industrial Average is a stock market index tracking the prices of 30 large companies listed on stock exchanges in the United States. Indexes are unmanaged and cannot be invested in directly.

Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principal.

Quote of the week: Morgan Housel: “No matter how much book knowledge that you have, if it’s not coupled with an appropriate amount of patience and long-term thinking, you’re not going to get very far.”

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