2022 has proven a rough start to the year for all investors.

Global stocks, whether investing domestic or abroad, are down between 15%-20%. Bonds, a traditional safe haven, have been impacted by the sharp rise in interest rates and are down nearly 12%.

Given the current market decline, you may be wondering: is this stock market drop normal or is it unique?

THIS TIME ISN'T DIFFERENT

As Mark Twain famously wrote, “history doesn't repeat itself, but it often rhymes.” The stock market is no different.

Since 1929 the US stock market has declined by at least 20% 26 different times.[i] A 20% decline is considered a "bear market." Of those 26 drops of 20% or more, 15 have resulted in a recession.[ii] On average, the stock market will experience a significant decline every 3-4 years.

The cause of a bear market, or even a recession, is never the same. Since 1929 the US has experienced countless wars, a presidential assassination, periods of significant inflation, oil crises, tech booms and busts, 9/11, a housing crisis, and now, a global health pandemic followed by an invasion of Ukraine. Assuredly, each historical event has felt even more dire than the one that preceded it. If the last bear market wasn’t permanent, then surely this one must be? This too shall pass.

REWARDING THE PATIENT INVESTOR

The common theme during periods of economic stress have been that they are temporary. While bear markets can be painful, markets tend to be positive a majority of the time. In fact, of the last 93 years of market history, bear markets have comprised only about 20 of those years. Put another way, stocks have been on the rise 78% of the time.

The regularity of market crashes is a reminder that patience is key to investing in the stock market. Reviewing historical stock market data provides clear evidence that market crashes aren’t as unique as one might have thought. Market declines and downturns can be frightening in the short term, but for investors who can stay in the market for the long run, the stock market continues to provide rewards for taking these risks.

CLOSING THOUGHTS

Liz Ann Sonders, Charles Schwab’s Chief Investment Strategist, said the following in a letter she recently penned:

If markets are good at one thing, it’s reminding investors that stock prices don’t simply go up, uninterrupted, forever. Markets do drop. Bear markets arrive. That’s an unavoidable part of investing. What matters is how you respond. That can be especially difficult when markets are volatile. But if we learn from our mistakes, use our brains over our hearts and look to our portfolios as rebalancing guides, we can expect a more successful investing future.

We whole heartedly agree with Liz Ann. Developing a long-term investment allocation isn’t the hard part- it’s sticking to it that often becomes the real challenge. We urge our clients to reach out with any investment thoughts or concerns that they may have. We will continue monitoring investment portfolios for rebalancing and tax loss harvesting opportunities to ensure proper alignment to your long-term financial goals.

Thank you for your trust.

[i] Hartford funds

[ii] National Bureau of Economic Research, 9/20