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Sometimes when I feel wrapped up in the drama of my life, I like to take a second to zoom out and put things into perspective.
And no, I don’t mean asking my therapist about it. I mean, really zoom out. How will what I’m going through right now figure into the grand scheme of my life? Or, you know, as part of human history – from the dawn of man to death by the heat of the universe? Maybe I’m crazy, but it usually brings me some comfort.
Right now, there seems to be daily drama with the stock market. From early January to mid-October, the S&P 500 fell 25% on a cocktail of bad news, which included runaway inflation, rising interest rates, a lingering pandemic and ground war in Europe. Stocks appear to have made a comeback of late, with some market watchers believing inflation may have peaked.
Still, some economists believe now is the time to sell, with the current rise representing a brief respite before a more painful recession hits in 2023.
So what’s an investor to do? To buy? Sale? Personally, I like to keep an eye on 1987.
Do you remember 1987? Investors who were there at the time certainly do. On October 19 of that year, the Dow Jones Industrial Average fell 22.6% – the biggest one-day drop in the index’s history. The day became known as Black Monday.
The headlines of the time were terrifying. Accident! Panic! Bedlam on Wall Street! In total, between August 25 and December 4, 1987, the broader US stock market lost 33.5%. If you were looking at your wallet back then, it probably looked like a disaster. Some 20 months later, the market had fully recovered and was about to hit new highs.
In light of this fact, I recommend the following exercise: Type “S&P 500” into Google. When the graph appears, select “Max”. Now find 1987.
The stock market’s historic bullish trajectory has reduced it to a small flash on your screen, and that’s what all the market pundits are trying to argue telling you not to panic and stick to your plan for now. long term.
If the market continues to behave as it always has, whatever your portfolio does today, tomorrow, or next year, ultimately won’t matter much in the decades you’re likely to lose. invest.
As long as you regularly invest in a broadly diversified stock portfolio, any drama in your portfolio will eventually matter as little as it did in 1987.
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