I am writing this on Friday February 19, 2021.
The Dow Jones is bouncing around 31,600. The S&P 500 is currently 3,928.
I mention these details to highlight where we stood on this date, one year ago today.
The Dow Jones closed at 29,409 and the S&P500 closed at 3,393 on February 19, 2020.
And for a long period of time throughout 2020, it appeared the markets had reached its’ high mark for the year on February 19th, 2020. If you were Rip Van Winkle, and woke up one year later (today), you would see some generous returns for the past twelve months. Right?
But what did we endure to get from there, to here?
We do live in interesting times. Or, as the John Lennon song goes, “Strange days indeed. Most peculiar, mama!”
Thinking about living in interesting times.
Thinking about what the market has done in the past year has forced me to ponder. What a fantastic opportunity we all had last spring. We had a great window of time to invest at bargain prices last spring. But it was all so terrifying!
And for many, the stock market was a side-show, a distraction. So many were facing a health crisis in their families, or being let go from a job, or dealing with a incredibly swift and deep recession.
So the stock market gyrations were not “front and center” for many. That is, unless you live and breathe it like we do at Mullooly Asset Management. We get an “inside view” at how the human psyche works. Especially at market extremes. For example, I cringe a bit when folks say, “Well, I want to get this money invested. But, you know Tom, I want to wait. That’s because the market seems really high right now. Don’t you think so?”
I know it’s impolite to answer a question with another question. But upon hearing this, I feel compelled to often ask, “how do you even KNOW the market is high?”
The only way to know with certainty is by looking back over time.
Let me clarify. To traders, the market is almost always high.
But for longer term investors, is it high at all?
Again, the only way to know with certainty is by looking back over time.
If you consider yourself a long term investor (and you should), try this on for size. When I began as a broker, the S&P 500 was at 210. Today it is approaching 4000. That spans the period from early 1986 through now.
Has it been a steady ride? No.
Has it been straight up? No.
Has it been easy to stay invested? No.
Have I felt foolish adding money when some investments were down? Hell yes.
Have there been gut-wrenching times when I wanted to do something else with that money? Ohhh, yes.
We flirted with that “high water mark” of February 19 again, around Labor Day. Close, but not quite. The markets did not set another new high until early November. A very long period of time, it seemed.
And, as many know, “Dow 29,000” in February became “Dow 18,213” in March, just a few short weeks later. I will be happy to remind people I believed – in April, 2020 – that getting back to 29,000 would be an extremely good accomplishment.
And let this message serve as a reminder. Markets are volatile, whether we are in “interesting times” or not. We need to remain aware markets do not move straight up, nor do they move straight down. We may give back some of the gains we have recently seen, and that will be OK. I do not believe in magic, voo-doo, or even karma.
And we do not make decisions based on feelings!
At the present time, some will say markets are getting back on track. Others will say we have “flipped a coin and gotten heads eight times in a row, we’re due for something.”
This is what makes a market, not just for interesting times, but for all times.
I recently posted an image that encapsulates this concept very well!