Don’t Just Do Something, Stand There

Standing Still

Written by Jeff Helms

The financial world is complex and constantly changing. Those changes can impact our clients and their plans for the future. As the firms founder and Managing Partner, making sense of these changes is my job. We try to simplify communication on market dynamics to make it meaningful and useful for our clients.

May 24, 2022

We have been writing about it all year. The financial markets continue to digest a lot of news about the economy: some good and some not so good. As a result, volatility (both up and down) continues.

Markets are very good at figuring out the prospects for growth and profitability and pricing investments accordingly in the long run. But in the short run (like now), it can be a messy process. We felt it might be an appropriate time to give readers a little history lesson and some perspective to remind everyone that we have been here before many times.

While it’s human nature to feel nervous when we see market sell-offs, it’s also human nature to forget them quickly when the recovery starts and markets begin their relentless march back upward. Remember – there’s always a recovery. We just don’t know when it starts until after it happens.

We have been through worse

Here’s a little test. See if you can recall how you felt when the following events occurred in the past:

If you’re at least 50 years old, the S&P 500 index [i] has fallen by half three times in your life. (It’s nowhere near that now, but stay with us.) To wit:

January 1973-October 1974         -48%

March 2000-October 2002           -49%

October 2007-March 2009           -57%

You can be sure genuine crises caused these. In 1973-74 we had the Arab oil embargo and Watergate. Then in 2000-2002, we had the dot-com implosion. And lastly, the global financial crisis in 2007-2009 when the world’s credit system froze up. All three represented far darker times than we now face. (We’ll get to that in a minute.)

Indeed, investors would have been right to run for the sidelines in all these cataclysms. Right? Well, maybe not. The S&P 500 peaked in 1973 at 120, and the dividend it paid that year was $3.61. As we write this, the index is at around 3920, and the dividend last year was $60.40. You didn’t ask, but the average annual return for the investor who just stayed put the whole time – after the index halved three times – was 10.5%. That’s not some quirk; it’s a testament to the resilience of great American companies.

Here’s another perspective. Since 1980, the S&P 500 index has experienced an intra-year average decline of -14 percent. Yep, that’s right. On average, the market declines by the mid-teens at some point during the year every year.

If you invested in the 500 best companies in 1980 and looked out the window through all the noise, you’d have earned an annualized return of 9.94 percent per year.

So the question is – do you recall how you felt the last 30 times this happened? How about the previous 10? How about when the market went down -37 percent in the span of three weeks in March 2020 – a mere two years ago?

Our point is this: It always feels different, but the movie always ends the same way, and investors tend to forget – until the next time. For those investors with the constitution and the confidence in their portfolios to ride out what is a normal and natural part of the business cycle, this correction will fade into history –  just like all the others have.

In fact, it would be a splendid time to talk about putting more capital to work if you happen to have it lying around to take advantage of the bargains that have been created.

What is going on this year?

Now, let’s talk about the underlying causes of all this noise.

As of late, the talking heads have been drumming the threat of a recession into us daily. The U.S. economy is battling between forces boosting growth and dragging it down. Yes, the likelihood of a recession at some point is greater today than it was at the beginning of the year. But recessions are normal and natural parts of the business cycle. We have one on average about every seven years. Let’s stick with 1980 as our base year. We’ve had six recessions since then—some deeper than others. The total number of months since 1980 is 508. The total number of months in recession since 1980 is 58. That is to say that during this period, the U.S. economy expanded 88% of the time. Most economists are still calling for the U.S. economy to grow this year – not shrink. Time will tell, but recessions don’t mean an end to growth; they’re mere speed bumps in an ever-growing economy.

Our comments are not meant to trivialize the discomfort we all feel when markets behave like they are. We’re just trying to put some perspective to it by reminding investors we’ve been here before many times. We’re quick to remind clients that markets such as this are factored into their financial plan forecasts and accounted for and expected. Call us if you’d like to review your plan with us or chat about the current state of things. That’s why we’re here. Meanwhile, we’re working hard on our next client webinar, where we’ll sort through the prospects for the rest of the year.



[i] The S&P 500 index is an unmanaged market-cap-weighted index of the 500 largest companies in the U.S. It is owned by Standard and Poors. You cannot directly purchase the index. Data throughout this article, including data used in the creation of charts is courtesy of