Boy, has this been a quarter.
After yesterday’s action the markets are down about 13%. That’s the worst quarterly return since 2002. Indeed, over the last 70 years, the market has declined more than this only 13 times. That’s a telling statistic. Because while declines of this magnitude are unsettling, they’re not unprecedented. In fact, they happen every 5 years or so.
Make no mistake: the current downturn is a made-in-Washington affair, with politics trumping policy and radically mixed signals confusing the markets. Add to this an unpopular lame-duck administration that doesn’t have the political capital to push through bold measures to add to our financial capital, and we have a witches-brew of double trouble.
But witches warnings are dangerous signals to run by. Over these same 70 years, if you bought into the market after each of these large quarterly downturns, you would have received a 13% return over the next 10 years. Just living through the waves give you an 11% return.
Because the world has a way of not ending. Whether it was Pearl Harbor, Nixon’s resignation, or the Enron debacle, the fundamental factors that caused the market’s decline were overcome. But our economy recovered, and investors with staying power profited. Yes, you can.
Douglas R. Tengdin, CFA
Chief Investment Officer
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