Lately, you may have noticed the stock market experiencing more ups and downs than usual. While this can feel unsettling, it’s important to keep the bigger picture in mind. Market volatility—those inevitable ups and downs—is a natural part of investing. It’s been around for as long as markets have existed, and history shows us that it’s not something to fear. In fact, staying the course during these times is often the smartest move. Let’s break it down.
Volatility Is Normal—and It’s Why We See Growth
Think of the stock market like a roller coaster. The dips can be scary, but without them, we wouldn’t get the thrilling climbs either. If markets never went down, we wouldn’t have as many chances to see big returns. Over time, markets tend to trend upward. For example, since 1990, the S&P 500 has faced 23 drops of 10% or more—yet it still grew an average of 7.7% per year through 2019. That’s because investors see downturns as opportunities to buy undervalued stocks, pushing the market higher in the long run.A Look at History: Big Drops, Bigger RecoveriesLet’s look at some real examples of when the market took a tumble—and how it bounced back:
- 2000-2002 (Dot-com Bubble): The S&P 500 fell about 50% over a couple ofyears when tech companies crashed. But it recovered and kept growing.
- 2008 (Financial Crisis): The market dropped a huge 57% from its peak. It wasrough, but by sticking it out, investors saw new highs within a few years.
- 2020 (COVID Crash): The S&P 500 fell 34% in just weeks. Yet it roared back fast,hitting record levels by the end of the year.
- 2022 (Fed Tightening): The market declined about 25%, but it stabilized andstarted climbing again.
Here’s the proof it works: If you’d put $100 in the S&P 500 in 2000 and left it there, reinvesting dividends, you’d have about $665 by the end of 2024. That’s a 565% gain—or nearly 8% a year—despite all those wild swings.
Why Staying Invested Beats Jumping or Cashing Out
When the market drops, it’s tempting to sell and wait for calmer days. But that can backfire. If you sell during a dip, you “lock in your loss”—meaning you lose that money for good unless you buy back in at the perfect moment. And timing the market is tough because the best days often come right after the worst ones. Since 1990, missing just the best day each year would’ve cut your return from 7.7% to 3.9%. Miss the best two days a year, and you’re barely up 1%. Miss the top 20 days, and you’d lose 27% a year! Staying invested keeps you in the game for those big recovery days.
Source of graphic within the disclosure.
We understand that volatility can also make cash feel like a safe choice, but cash comes with its own risks. Inflation eats away at cash over time, so you’re actually losing buying power. Plus, the market always recovers and hits new highs—cash doesn’t grow like that. Timing when to get out and back in is nearly impossible, and even professionals struggle with it. For example, after the 2008 crash, some people sold and missed the huge gains that followed. Those who stayed invested came out ahead.
If the market’s ups and downs are keeping you up at night, let’s talk. We can revisit your asset allocation—your mix of stocks, bonds, and other investments—to adjust the risk while keeping you in the game for long-term growth.
Tips to Thrive Through the Ups and Downs
Here’s how to stay steady when the market gets bumpy:
- Know Your Plan: Your investment strategy was built for your goals, timeline, and how much risk you’re okay with. It’s designed to weather storms like this.
- Check Your Goals: Are your needs or dreams still the same? If not, let’s tweak your plan. If they are, trust that your strategy is still on track.
- Stick With It: Jumping in and out based on fear can hurt more than help. Your plan is about the long haul, not today’s headlines.
We’re Here to Help You
Market dips like the one we’re seeing now feel big, but they’re small compared to history’s bear markets. Your money is for your future – retirement, a dream home, or whatever matters to you. Short-term noise doesn’t change that. If you’re worried or want to discuss your strategy, please reach out. We’re here to guide you toward long-term success, no matter what the market does today.
*Source: J.P. Morgan Asset Management using data from Bloomberg. Returns are based on the S&P 500 Total Return Index, an unmanaged, capitalization-weighted index that measures the performance of 500 large capitalization domestic stocks representing all major industries. Indices do not include fees or operating expenses and are not available for actual investment. The hypothetical performance calculations are shown for illustrative purposes only and are not meant to be representative of actual results while investing over the time periods shown. The hypothetical performance calculations are shown gross of fees. If fees were included, returns would be lower. Hypothetical performance returns reflect the reinvestment of all dividends. The hypothetical performance results have certain inherent limitations. Unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees and other costs. Also, since the trades have not actually been executed, the results may have under- or overcompensated for the impact of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. Returns will fluctuate and an investment upon redemption may be worth more or less than its original value. Past performance is not indicative of future returns. An individual cannot invest directly in an index. Data as of December 31, 2024.
This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.
