War
by Danno
"Without the bitter, baby, the sweet ain't as sweet." ~Brian Shelby (actor Jason Lee) in Vanilla Sky (2001) (YouTube link)
Without the market risks, there would be no market return. Assuming you are well diversified, more stocks/risk means more return over the long-term, and more volatility over the short-term. If you can't handle that, you might need to tweak your allocation.
Stocks got whacked again yesterday, and that never feels good. It was a bitter day. We're basically back to where we were 12 days ago, and where we were in Summer 2021.
But instead of staring at your account and panicking and looking for nuclear bombs in the sky, let's just chill out a little and look at data.
1st: 12 days ago we then went up 6%-8% in the following 2 days.
2nd: This volatility started in Q4 2021 when the Fed began shifting the expectations about raising interest rates. In my opinion, for now, this is still more important to the stock market than what's going on in Ukraine.
3rd: For the sake of today's blog, I'll play along with the idea that this is all about the risk of WWIII breaking out, but I don't buy that.
4th: This minute-by-minute and day-by-day shit in the media is garbage. That's not investing, that's trading and price discovery and advertising. Almost every amateur investor would be better off uninstalling their brokerage app from their phone and just looking at their monthly statement they get in the mail. Investing is long-term.
We are ~15%-20% off the all-time highs depending upon which major index you looked at. We don't know what happens next in the Ukraine. What we do know is that we've had other scary geopolitical things happen before, so let's look at virtually all of the major geopolitical events of the last 80 years.
Instead of using a bunch of different graphs to make my point, I'm just going to cut to the chase and show you 1 simple 80-year table (found on Bloomberg.com) and 1 monthly chart of the same 80 years:
And the chart of the S&P 500 in Log scale over the same 80 years (from macrotrends.net):
Doesn't look all that scary, does it?
This is really simple, guys. While these major events are scary, they have little to do with where your investments will be a month or a year from now.
If you read my stuff, you're probably tired of hearing this, but you have to do it.
Think long-term. Zoom out.
Now go drop some knowledge on a friend. I'm out.
Legal Disclosure: This is not Investment Advice. The commentary on thetransparentadvisor.com reflects the personal opinions, viewpoints, analyses, and often sarcasm of Danno Hoff and should not be regarded as a description of services provided by his employer or its affiliates. The opinions expressed in this website are for general informational and entertainment purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry and provoke thoughts. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Any indices referenced for comparison are unmanaged and cannot be invested into directly. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.