Fast Animals

My last post was on April 24th.  It’s safe to say a lot has happened since then.  I’ve been on radio silence here because:

  • I was writing quite a bit for work and needed to rest my brain
  • Writing updates as a market is recovering is met with a great deal more skepticism than telling people to stay calm during down markets
  • I am lazy

So what happened?  This:


Fastest Bear

It’s the fastest bear market ever followed by one of the fastest rebounds.  If you click to make it bigger, you’ll see the S&P 500 dropped 33.79% over 33 days.  It then ran up 31.59% over the following 37 days.  The numbers don’t really sound like much, but that’s years of market moves within the span of about 2 months.  There was a lot of hand-wringing about “is this the bottom” and “how much farther will stocks fall”.

You didn’t have to buy at the exact bottom to make money.  If you rebalanced on the way down or even on the way up, you are likely better off today than if you just bought and held.  If you had some dry powder on hand, you could have even spread it across a few days or weeks.

Why Would You Do That?

Often, the biggest up days occur near the biggest down days.  I circled two instances in the chart above. The S&P 500 dropped 9.5% on March 12 then popped back up 9.3% the next day.  Imagine getting scared out of the market on a really bad day just to see it shoot up 9% the next.  Or deciding to “Buy The F’ing Dip” after a huge down day just to find stocks 9% more expensive the next.  Trading in a choppy market will drive you crazy which is why it makes more sense to think long-term.

Wealth isn’t created due to decisions made at market tops or bottoms.  It is made in the preparation and execution of your investment process.

Where Are We Now?

The S&P 500 is up about 15% since my last post on April 24th.  It’s flat on the year.  That’s right, if you were on an island filming a reality TV show for the last six months, the market hasn’t really moved much.  The NASDAQ has gone bonkers.  It’s up over 20% year-to-date.

So is that it?  Did you miss a generational opportunity to buy stocks on the cheap?  Nope.  Small Cap, International, and Real Estate are all down double-digits.  “BUT THOSE AREAS SUCK!  I JUST DON’T SEE HOW THEY CAN COME BACK DURING THESE UNPRECEDENTED TIMES!”  What do you think everyone was saying on March 24th at the bottom?  “MARKETS IN TURMOIL.  HOW MUCH FARTHER WILL THE MARKET DROP?  OUR WORLD IS CHANGED FOREVER.  I SHOULD HAVE SOLD EVERYTHING!”  Nobody saw the market bouncing back at all, let alone so violently.  Things are changing, but change is the only constant in history.  The world continues to move forward as it always has.