When the markets get scary, play the long game: Morning Brief

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Tuesday, September 13, 2022

Today’s newsletter is from Sam Roeits author TKer.co. Follow him on Twitter at @SamRo.

We’re a long way from 1995. Image courtesy of Sam Ro.

When uncertainty in the world is on the rise, it’s easy to let fear take over and let doubt poison your investment decisions.

This year, high inflation and geopolitical tensions have been among the fear factors that have driven stock prices lower.

But the stock market has an impressive track record of overcoming almost insurmountable odds.

Barry Ritholtz, co-founder and CIO of Ritholtz Wealth Management, recently shared an image attributed to David Booth, co-founder of Dimensional Fund Advisors:

“25 Years Ago, Crystal Ball Reveals: Russian Debt Default, LTCM Failure, DotCom Crash, 9/11 Attacks, Financial Crisis + Great Recession, Pandemic Killing Millions, 3 Market Crashes. Would you put your money in stocks? No? You missed a return 10 times.”

At Monday’s close of 4,110, the S&P 500 is down significantly from its January high of 4,818. But the index is still well above the 481 it last saw in 1995.

The quote reminded me of something Warren Buffett said in a New York Times op-ed during the Global Financial Crisis:

“In the long run, stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and costly military conflicts. the Depression? a dozen or so recessions and financial panics. oil shocks; a flu epidemic; and the resignation of a disgraced president. However, the Dow rose 66 to 11,497.

Earlier this year, BlackRock’s Daniel Prince shared an illustrated version of these quotes in this annotated, long-term S&P 500 chart.

Image: BlackRock

Image: BlackRock

“When times are tough, we want to cut our losses,” Prince wrote. “Even when things are going well, we wish we had invested more. We’re all afraid of losing.”

“But when investing, giving in to fear is often a losing strategy,” he added. “More often than not, investors with this mindset tend to buy high and sell low, as they invest more in a rising market and cash out in a falling market.”

Investing means understanding that there will be unexpected problems along the way to achieving long-term financial goals. And those hits can be significant. But it’s part of the deal. In fact, this risk is precisely why stock market returns can be relatively high.

It’s almost impossible to ignore the barrage of headlines that will keep you second-guessing your investment decisions. So, if you do have short-term concerns, be sure to also remember the long-term history of the stock market’s triumphs.

What to watch today

Financial calendar

  • 7:00 am ET: NFIB Small Business OptimismAugust (90.1 expected, 89.9 last month)

  • 8:30 am ET: Consumer price indexmonth-on-month, August (-0.1% expected, 1.3% last month)

  • 8:30 am ET: CPI excluding food and energymonth-on-month, August (0.3% expected, 0.3% last month)

  • 8:30 am ET: CPI, year over yearAugust (8.1% expected, 8.5% last month)

  • 8:30 am ET: CPI excluding food and energyy/y, August (6.1% expected, 5.9% last month)


Yahoo Finance Highlights

Inflation: Consumer prices likely eased for a second month in a row in August

Twitter whistleblower; Nikola founder; and former Uber executive trial: legal stories to watch

Energy stocks “look extremely attractive,” says portfolio manager

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