Don’t Overreact to the Movements

With the first half of 2020 behind us, it seems like a good time to reflect on where we’ve been and where we think things might go. The goal isn’t to armchair quarterback what’s happened or consult a crystal ball to determine what might happen next. Instead, I want to focus on two things:

1) Why an investment philosophy matters

2) What we can control

Let’s pretend for a moment that your “strategy” for investing in 2020 relied only on news reports. Think about how you would have reacted to the following:

  • In six months, we’ve seen three of the worst 25 losses and two of the largest 25 gains for the S&P 500.1
  • In 16 trading days, the S&P 500 plummeted 20% from its peak, creating the fastest bear market in history.  It took only 3 more trading days for the S&P 500 to plummet 30%.2
  • There have been 35 daily gains or losses of 3% or more this year.  Over the past 5 years, there have been just 11 moves of 3% or more in total.3
  • From 2015-2019, we didn’t experience a single daily gain of 4% or more. In 2020, we’ve already seen it eight times, with five of the days hitting 6% or higher.4

See the problem? With all that conflicting information, making investment decisions becomes really difficult. That’s why we’re such big supporters of investing based on long-term prospects and protecting portfolios with easy-to-understand strategies, like avoiding unnecessary fees and expenses. It’s not fancy. It won’t make big headlines. But it will, over time generate results.

This leads to the second point. We don’t know what the rest of the year holds. We have zero control over what the markets will do next or what might happen in the world. But we can control what we do.

It starts with remembering that you’ve adopted a financial plan for the very purpose of helping you deal, both emotionally and strategically, with the ups and downs in the market. Even if we weren’t in the midst of a global pandemic, investors will still have to deal with the widespread civil unrest and a presidential election cycle. The fact remains that markets move, and sometimes, they’ll move over little things just as fast as big ones.

Our goal is to not overreact to those movements. That goal becomes much easier when we have the foundation of a proven investment philosophy combined with a willingness to focus on what we can control.

We can’t afford to get distracted, and that’s why at Strathmore we’re always available to chat. Sometimes, a quick conversation is all it takes to get refocused.

We look forward to speaking with you sometime soon.

Take care and stay safe. We’re here for you if you need us.

Best Regards,

John Charles Kernodle


Ben Carlson, “Is This The Most Volatile Year Ever?”, A Wealth of Common Sense, June 12, 2020
Beth Kindig, “Algorithms sped up selling, leading to the fastest bear market in stock market history”, Market Watch, March 26, 2020
Ben Carlson, “The 2020 Stock Market By the Numbers”, A Wealth of Common Sense, June 7, 2020
Ben Carlson, “The 2020 Stock Market By the Numbers”, A Wealth of Common Sense, June 7, 2020

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