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99% Boredom, 1% Panic

J. Patrick Collins Jr., CFP®, EA

When my wife and I had our first child I struck up a conversation with the anesthesiologist about what a typical day was like in his world.  I’ll never forget what he told me.  He said, “my job is 99% boredom and 1% panic”.  The vast majority of the time, things went to plan, but in the rare occasion when someone stops breathing or their heart beat can’t be found, it can be immediate panic.  During those stress-filled times, he needed to remain calm and maintain clear thinking in order to save his patient.

As I write this, the Dow Jones is down 750 points for the day after news of an escalating trade war between the US and China.  I can’t help but being reminded of the anesthesiologist I met that day and what he told me.  It’s the 1% panic day that requires investors to keep a clear head and not let their emotions get the better of them.  How do we do that?  Probably just like the anesthesiologist- rely on our experience during the episodes we have faced in the past.  Here are just a few guiding principles  that hopefully will help you maintain clear thinking:

  • Market volatility is normal– since 1980 the average intra-year loss in the S&P 500 is 14%. We always have had volatility and always will.  Despite all the bad news and volatility we could cite over the last century, 85% of all rolling 10 year periods show stocks outperform bonds.  Sticking with your investment strategy through the volatility is key.
  • Politics rarely have an impact on the markets– with the polarization of politics in the US many want to blame the stock market’s losses on the opposing party (or take credit when it is doing well). The reality is that who controls the White House or Congress has very little impact on the stock market’s return.  George W. Bush’s policies did not cause one of the worst stock markets in history and in the same vein Barack Obama’s policies did not cause one of the best markets we’ve ever seen.  As we’ve said countless times before- politics and investing don’t mix.
  • Capital markets create wealth– if you had invested $1 in the US stock market in 1926 it would be worth $6,792 at the end of June 2019.  During that time you would have had to deal with numerous wars, a Great Depression, a Great Recession, and countless other crises.  When you own the market, you own a slice of thousands of businesses.  These businesses will continue to innovate, create new products and generate wealth for their owners, despite the economic and political climate.

We at Greenspring understand times like these can feel stressful.  We encourage you to contact us directly if you have any questions or concerns.