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This Time is (Not So) Different

July 2020 | Lauren Kukawinski | Resources > Blog

Having a Process and Plan through Market Fluctuations

It’s often said that investing is a roller coaster ride, and if that is true- investing this year has been the ride of our lives. We started the year out in an excellent position- highs in the market combined with low unemployment and tax rates. It felt like smooth sailing. So, how did we go from moving through a decade long expansion, reaching a record high in the stock market on February 19th, to being in a bear market (a 20% downturn in the market from the previous high) just 20 days later?

COVID-19 may be the easy and obvious answer to that question but, the more nuanced one is “fear.” Even before we were officially in a recession (two consecutive quarters with negative gross domestic output [GDP] in U.S.), the media pounced and started saying things like “the market is in a free fall,” “we’re headed towards another great depression,” and perhaps the most detrimental phrase of all- “this time is different.”  While the news media can be informational, it’s not often great at providing perspective, and that is where Kennedy Financial Group can help.

So, are things really that different?

While experiencing a global pandemic is not something any of us can say we have been through before, navigating market downturns has happened time and time again.  In our lifetime, we have seen the burst of the tech bubble in the early 2000’s, the tragedy of September 11, 2001, and the financial collapse in 2008-2009. Each of these experiences were scary and full of uncertainty but, each and every time, we made it through.

This chart, detailing the last 40 years in the stock market, from J.P. Morgan may look confusing but, from it we can glean some really valuable information. The numbers and bars in gray represent the calendar year returns. The red dots and numbers tell us what the intra-year decline from the market high was. From this, we see that intra-year declines happen every year and, about every decade or so (there is no timing the market, after all), we have declines of over 30%. Are these declines scary in the moment? Yes. Are they the end of our financial stability? Absolutely not.

We can get through this.

Even with the declines, the average return of the last 40 years was 8.9% with dividends of around 2%. This means that annualized returns settled at around 11%! While nothing is ever guaranteed, this should provide some comfort. Your financial future can’t be driven by emotions and reactions. It takes a plan and a process to navigate the uncertainties, allowing you to not only survive changing financial climates, but to thrive.

If you’re still feeling nervous, please do not hesitate to reach out to our office. We would love to share our philosophy with you and help you and your family through this uncertain time. Call us at (248) 528-0485 or email Team@KennedyFinancialGroup.org.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Past performance is no guarantee of future results.

To discuss any of the topics covered, and how they might affect your finances, don’t hesitate to <a href=”https://kennedyfg.com//schedule-a-meeting/”>schedule a meeting</a> with us!

Securities offered through LPL Financial,Member FINRA/SIPC. Investment advice offered through HighPoint Advisor Group, a registered investment advisor.

HighPoint Advisor Group and Kennedy Financial Group are separate entities from LPL Financial.

Stuart Ritter and T. Rowe Price are not affiliated with LPL Financial,

HighPoint Advisor Group or Kennedy Financial Group. Steven Fronrath is solely an Investment Advisor Representative of HighPoint Advisor Group, and not affiliated with LPL Financial.

Dave Ramsey and SmartVestor are not affiliated with LPL Financial.

Any economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that any strategies promoted will be successful.