When the markets get scary, play the long game: Morning Brief

When the markets get scary, play the long game: Morning Brief

This article first appeared in the Morning Brief. Get the Morning Brief delivered straight to your inbox Monday through Friday by 6:30 a.m. ET. Subscribe

Tuesday, September 13, 2022

Today’s newsletter is from Sam Rothe author of TKer.co. Follow him on Twitter at @SamRo.

We are a long way from 1995. Image courtesy of Sam Ro.

When uncertainty in the world soars, it’s easy to let fear take over and allow doubt to plague your investing decisions.

This year, high inflation and geopolitical tensions were among the fear factors that drove stock prices lower.

But the stock market has an impressive track record of overcoming almost insurmountable odds.

Barry Ritholtz, co-founder and CIO of Ritholtz Wealth Management, recently shared a preview he credited David Booth, co-founder of Dimensional Fund Advisors:

“25 years ago your crystal ball reveals: Russian debt default, LTCM failure, DotCom implosion, 9/11 attacks, financial crisis + great recession, pandemic killing millions, 3 stock market crashes. Would you invest your money in stocks? Nope? You missed a 10X return.

As of Monday’s close at 4,110, the S&P 500 is down significantly from its January high of 4,818. But the index is still well above 481, which it last saw in 1995.

The quote reminded me of something Warren Buffett said in a New York Times op-ed in the depths of the global financial crisis:

“In the long run, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and costly military conflicts; the depression; a dozen recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow fell from 66 to 11,497.”

Earlier this year, Daniel Prince of BlackRock shared what is effectively an illustrated version of those quotes in this annotated long-term chart of the S&P 500.

Image: Black Rock

Image: Black Rock

“When times are tough, we want to limit our losses,” Prince wrote. “Even when things are going well, we would have liked to invest more. We all worry about missing something.

“But when investing, giving in to fear is often a losing strategy,” he added. “More often than not, investors with this mindset tend to buy high and sell low, as they invest more in a rising market and withdraw money in a falling market.”

Investing means understanding that there will be unexpected obstacles in the way of achieving long-term financial goals. And those bumps can be significant. But that’s part of the deal. In fact, this risk is precisely why stock market returns can be relatively high.

It’s almost impossible to ignore the deluge of headlines that will make you doubt your investment decisions. So if you find yourself preoccupied with short-term worries, be sure to also remember the long-term story of stock market triumphs.

What to watch today

Economic Calendar

  • 7:00 a.m. ET: NFIB Small Business OptimismAugust (90.1 expected, 89.9 in previous month)

  • 8:30 a.m. ET: Consumer price indexmonth-over-month, August (-0.1% expected, 1.3% in prior month)

  • 8:30 a.m. ET: CPI excluding food and energymonth-over-month, August (0.3% expected, 0.3% in prior month)

  • 8:30 a.m. ET: CPI, year over yearAugust (8.1% expected, 8.5% in previous month)

  • 8:30 a.m. ET: CPI excluding food and energyYoY, Aug (6.1% expected, 5.9% in prior month)


Yahoo Finance Highlights

Inflation: Consumer prices probably moderated for a second consecutive month in August

whistleblower on Twitter; Founder of Nikola; and trial of former Uber executive: legal stories to watch

Energy stocks ‘look hugely attractive’, portfolio manager says

Click here for the latest stock market news and in-depth analysis, including events moving stocks

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#markets #scary #play #long #game #Morning

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