I pointed out a positive divergence within the stock market’s internals the other day. Ever since, stocks have been on a tear, getting into positive territory for the month of February and pulling out of “correction territory” as well (I know, it’s stupid).
But even though stocks have gone vertical in the last week, it’s probably too soon to tell whether or not we’ve seen the worst of the current cyclical bear market.
My point today, for long-term investors, is “so what?”
Larry Swedroe offers an important reminder via ETF.com that, ultimately, things get better and worst case scenarios rarely play out.
Over more than 40 years of providing investment counsel to corporations, endowments and individual investors, I’ve learned that one of the keys to successful investing is to avoid the tendency to “catastrophize”—envisioning only the worst possible scenario.
From 1973 through 1974, the S&P 500 Index lost a total of 37%. Over the next five years, it returned almost 15% per year. And over 25 years, it returned more than 17% per year.
From April 2000 through February 2003, the S&P 500 Index lost an even greater total—more than 41%. Then, from March 2003 through October 2007, the index returned more than 100%, providing an annualized return of more than 16%.
From November 2007 through February 2009, the S&P 500 Index lost a still-greater total— more than 46%. Then, from March 2009 through November 2015, the index returned 227%, or more than 19% per year.
Josh here – these are facts. Opinions < Facts.
I would avoid commentators who relentlessly harp on the potential for worst case scenarios at every opportunity. They are more adept at helping themselves through the publicity of their extreme calls than they are at helping anyone else.