How Often Do Stocks Fall?

As renowned author Morgan Housel (prior Weekend Reading interviewee ) eloquently stated, forecasting when/why markets selloff is impossible.

Housel’s words resonated this week – case in point, Thursday.  After several weeks of relative calm and positive momentum in the markets, volatility returned on Thursday, and the Dow Jones declined 6.9%.

• In the context of 2020, Thursday was just the 4th largest daily decline this year – behind March 16 (12.93%), March 12 (9.99%), and March 9 (7.79%).

Even despite this significant volatility, markets are fairly close to positive territory for the year; even after Thursday, we’re close to where we started in early June.

Forecasts work both ways. While very few market prognosticators predicted a recession in 2020, maybe fewer predicted a swift recovery in the markets.

Instead of forecasting what will happen tomorrow, we should expect that volatile periods will occur for one reason or another over any given period of time.  This expectation of volatility should be viewed as a necessary part of obtaining long-term returns associated with equity markets.

We likewise develop our investment strategies around the expectation of volatility. No one knows when volatility is going to happen, but, when it does, it shouldn’t materially impact your investment strategy.

Mortgage rates set new record low, falling below 3% – CNBC

The average rate on the popular 30-year fixed mortgage hit 2.97% Thursday, according to Mortgage News Daily, as the stock market sold off and investors rushed to the relative safety of the bond market.  Rates of 15 year conforming loans are close to 2.5%.  If you’ve recently bought or refinanced, or your home loan is adjustable, you may want to consider refinancing.  We’re happy to review the costs and benefits of refinancing your current loan.

How Often Do Stocks Fall, Michael Batnick

According to Batnick, markets only trade at all time highs 7% of the time.  So 93% of the time, long-term investors will be disappointed.  Investing is a grind and a game of endurance.  Those who have stayed invested in the markets over long periods of time have historically been rewarded. According to Batnick, investing is like a game “with the biggest gains accruing to those that can withstand the most pain.”

We hope you enjoyed our weekend reading. Please reach out if you have any questions or would like to schedule a meeting.