Selloffs are never fun. One thing I used to absolutely hate as an advisor was hearing other professionals talk about them with an almost humorous tone. I was always convinced these folks, despite being in the business of money management, had no real skin in the game. I’ve been an investor for more than 30 years, and I can tell you, whether it was $100 or the equivalent of a beach house, logging into my account and seeing that kind of unrealized loss stings. That said, it is part of the process.
There’s an old adage on Wall Street that markets take the stairs up and the elevator down. This has always rung true in my experience. We often see a slow grind higher, then in a single day, weeks of hard-won gains vanish in an instant. In fact, this precise pattern is one of the hallmarks of a bull market, and if you think about it, it makes a ton of sense. As stocks climb ever higher, investors grow reluctant to commit new capital. Nervous about buying at the top, they step in tepidly. The market keeps climbing, so they keep buying, cautiously, incrementally. Then one day, seemingly out of nowhere, stocks get slammed and everyone rushes for the exit at once. Stairs up, elevator down.
Yesterday was one of the ugliest days I can remember in quite some time. I’m traveling with my family throughout Europe, and it was far from enjoyable to periodically log into my accounts and watch losses mount. Did it impact my day? Not at all. While it certainly wasn’t fun, I trust the process, I’m comfortable with my allocation, and I have plenty of time on my side to let the long-term game play out. In fact, near the end of the day I did a little buying, putting dividends and interest that have been accumulating over recent months to work as a few names I’d been eyeing came back into range. I have no idea whether those buys will prove profitable, but again, I won’t be measuring them over days or weeks, it’s months and years that matter.
As a DIY investor, by now you know this is what you signed up for. More than likely, this isn’t your first rodeo. You just went through something similar in March, and before that, the first-quarter selloff last year. You probably remember all of 2022, when neither stocks nor bonds offered safe harbor and who can forget COVID. I’ll stop there, but for many of us, ’08 and ’09 are not distant memories. They are battle scars we wear proudly.
As an advisor, I always used days like these as a proxy for a client’s true allocation. Regardless of age, time horizon, or life stage, if a sharp pullback is causing sleepless nights, your allocation is telling you something, and it should be revisited.
It doesn’t matter how well you sleep when markets rise every day. It’s the difficult stretches that test our resolve. Never try to time the market. Instead, find a time-tested allocation you can live with and stick with it through the ups and the downs.
Pundits, myself included, will point to yesterday’s strong jobs number as the culprit, arguing it throws cold water on any hope for lower rates. While that was certainly the spark, the tinder had already been building. Stocks had been running at a feverish and unsustainable pace, and a reset was inevitable. Now it’s here. Not a soul knows how long it will last or whether this is the beginning of a longer bear market. One day at a time, with patience and fortitude as your guide.
