If you consumed any media lately, you heard plenty of chatter about the “major selloff” in stock markets.
A friendly reminder, I describe most of the financial media as the “financial pornography complex.” The reason is that most media -- and financial media in particular -- are primarily focused on making money. And the way they make money is to keep people interested so they will watch the messages from advertisers. One of the great lessons of the social media age is that negative messages get more attention than positive messages.
So, take a deep breath. Maybe take a walk outside. Remember that your goals are long term goals. One day, one week, one month and even one year should NOT affect a solid, prudent financial gameplan.
Sure, the financial news is interesting. And it can be scary. So maybe it’s got you asking questions, maybe you should visit with an experienced, highly-trained, CERTIFIED FINANCIAL PLANNER™ professional and Behavioral Financial Advisor in Saint Paul, Minnesota to help better understand your options. I love to meet new people. So, follow this Link to find a time for us to have a get-acquainted visit.
In the meantime, here are some thoughts that I hope will put things into perspective.
The Stock Market is a Yo-Yo on an Escalator
It’s a yo-yo because it goes up and down all day long all the time. But the yo-yo is riding an escalator that rises over time.
Investors focused on recent performance alone would no doubt wonder if the cycle is over. While recent market events are still playing out, it’s important to remember that not only are stock market swings normal, but they can also be healthy if they are the result of investors adjusting to new economic facts. This is especially true if valuations improve as prices adjust, and corporate earnings continue to grow.
For many investors, the volatility since 2020 may already seem like a distant memory after the steady recovery of the past year and a half. As the accompanying chart shows, the S&P 500 has gained 124% since 2019, including the pandemic collapse and the 2022 bear market. While market pullbacks are never pleasant, viewing the market on these timescales does help to put the current decline in perspective.
Investing is about both returns and managing risk
Market pullbacks are normal. As the chart above shows, it’s routine to have several market pullbacks of 5% or more in a calendar year. And as the chart below shoes, the AVERAGE calendar year correction is 14.1% with calendar year returns POSITIVE 34 out of 45 years since 1980. And, this is while the S&P 500 has delivered an average total return (dividends reinvested) of 11.88% from January of 1980 to end of February 2025.
Stocks never move up in a straight line, so how we react to market volatility is perhaps more important than the volatility itself. The S&P 500 has now experienced its second 5% or worse pullback this year. As the accompanying chart shows, this is below the average of 4 to 5 pullbacks experienced in the average year, and the dozens during bear markets.
Today, market concerns are driven by tariff threats. The economy is still quite healthy, corporate earnings are still growing, employment remains high, and interest rates are near historical averages. As in past episodes of volatility, it’s important to keep your focus on your important financial planning goals. Do NOT be distracted by short-term events.
Clearly, market volatility can make you think. If it’s got you asking questions, maybe you should visit with an experienced, highly-trained, CERTIFIED FINANCIAL PLANNER™ professional and Behavioral Financial Advisor in West Saint Paul, Minnesota to help better understand your options. I love to meet new people. So, follow this LINK to find a time for us to have a get-acquainted visit.
I am a financial planner who is an advocate for my clients all the time – a Fiduciary Financial Planner. I provide guidance based on clients’ best interests. I think it’s the best way to serve clients and I am thrilled to work this way all the time.
And yes, I’m still taking on a few great families to be part of my financial planning practice in West Saint Paul, Minnesota and, thanks to Zoom, across the country.
Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.