Staying Calm When the World Isn’t
Lately, many investors are understandably concerned about the economy, inflation, and global conflicts—from Ukraine to the Middle East. Historically, these events bring volatility, but not necessarily long-term damage to the market. In fact, research shows that markets often recover faster than expected.
For example, following geopolitical events like the Gulf War, 9/11, and Brexit, markets initially declined, only to rebound strongly in the months that followed. The S&P 500 fell 11.6% in the month after the 9/11 attacks, but fully recovered within 30 trading days. After the 2016 Brexit vote, global markets dropped sharply, but the MSCI World Index posted a double-digit gain within six months.
The 2022 Russia-Ukraine crisis offers another example. The S&P 500 dropped more than 10% in early 2022 but regained those losses within a matter of weeks. Historically, geopolitical shocks tend to create only temporary market dislocations. According to a report by LPL Research, the average drawdown following a major geopolitical event is approximately 5%, with a typical recovery period of 47 days.
Moreover, the most significant stock market gains often occur amid uncertainty. A study by J.P. Morgan found that 7 of the 10 best days in the market over the past 20 years occurred within two weeks of the 10 worst days. Attempting to time the market during turbulence can result in missing those key rebound days, dramatically reducing long-term returns.
Staying invested and following a disciplined plan can generate far better results than reacting emotionally to negative news. Those who try to time the market often miss the best days, which disproportionately occur during turbulent times. A missed recovery can cost more than a market decline.
The best strategy in uncertain times? Stick to your plan. Trust the process. And lean on your advisor to help guide you through.
The Long-Term Advantage of Staying the Course
Time and again, long-term investors who remain committed to their plan emerge stronger than those who panic. A compelling example comes from the Great Financial Crisis of 2008–2009. At the market’s bottom in March 2009, the S&P 500 had lost over 55% of its value from its 2007 high. Investors who sold in fear locked in massive losses. But those who stayed the course participated in one of the longest and most powerful bull markets in history, with the S&P 500 climbing over 400% in the following decade.
Similarly, during the COVID-19 crash of early 2020, the market fell more than 30% in just weeks. Yet it fully recovered in under five months—one of the fastest rebounds ever recorded. Investors who resisted the urge to sell not only recovered but benefited from the rapid market surge that followed. According to Morningstar, investors who missed just the 10 best days of the market between 2001 and 2021 saw their returns cut in half.
It’s not just history—it’s math. Recovering from a 30% drop requires a 43% gain. Selling at the bottom turns temporary declines into permanent losses. That’s why Nobel laureate Eugene Fama famously said, “Your money is like a bar of soap—the more you handle it, the less you’ll have.”
Instead of making short-term decisions based on headlines, the most successful investors use downturns as opportunities: to rebalance, to harvest tax losses, or to simply stick to their allocation. Legendary investor Peter Lynch reminds us: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”
The takeaway? Markets will always face turmoil. But your long-term goals don’t have to. The wisest course is to remain invested, stay diversified, and work with a trusted advisor who can help you block out the noise and focus on what truly matters: long-term compounding.
