If you own assets, this year has been NAUSEATING.
This year is acting like we are coming down off of a COVID induced, stimulus sugar rush - a "normalization". Real Estate prices cooled in July at the fastest rate in history*, the S&P 500 is down 22% this year, and Crypto has been an absolute bloodbath. Even bonds, which have historically been a safe haven during shaky times, are having one of their worst years in history. American's have lost $9 Trillion in stock market wealth alone this year.** The chart below shows the S&P 500, the US Aggregate Bond Index, and Bitcoin Year-to-Date.
This leads us to ask, "What am I supposed to be doing?" (*Insert cliche*) It depends. For older investors that are past their big earnings years, there are not many places to hide. This demographic must embody the *next cliche* "you have to stay the course." If there is anything we learned over the past couple years, it is that these markets can change so fast, that it is not in your best interest to try and time it. You have been rewarded for staying put. The graphic below shows why...
But what about investors that look like me? Younger, growing income, with many years until retirement or larger financial goals. Historically, markets like these have created incredible buying opportunities for those who have had the stomach to handle it. Those who have been able to hold their nose and buy. What makes this year different than the past 10, is that stocks are not bouncing back as quickly, and we have been at lower levels for the majority of the year. If you look at the purple line in the chart below, you can see that stocks have taken longer to recover in 2022 than any of the other corrections since 2009.
That is a blessing for investors that are dollar-cost-averaging, or buying indiscriminately on a regular basis. This DCA strategy is most common in 401(k)s, but it can also occur in Roth IRA's, brokerage accounts, and even on crypto platforms. To illustrate, the chart below shows the growth of each $100 purchase of an S&P 500 fund starting in 2007, before the financial crisis (not that this compares so far). The purchases you would have made, and that grew the most in final value, were the ones you made in the worst of times, when everyone was fearful and running for the exit.
* https://www.cnbc.com/2022/09/27/july-sp-case-shiller-index-home-prices-cooled-at-the-fastest-rate-in-index-history.html
** https://www.cnbc.com/2022/09/27/stock-market-losses-wipe-out-9-trillion-from-americans-wealth-.html
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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. All indices are unmanaged and may not be invested into directly.
Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.