A Time to Puke

Today was an ugly day for the stock market. We have officially entered bear market territory for the S&P 500 Index, so we can stop dancing around the words “sell-off”. The arbitrary line in the sand has been crossed.

I have spent my career assisting clients through bear markets. I graduated from college at the bottom of the Dot.com bust, so all I can say about it is that my earnings suffered for many years as a result. The Financial Crisis was by far the longest and most painful bear market I’ve experienced as an advisor, and it etched foundational beliefs into my psyche. The GFC felt like it lasted forever, and the peak-to-trough decline for stocks was ~50%. Since then, bear markets have been sharp and swift. If you count the 2018 decline into Christmas (technically a bear), the market recovered within a few months, and we forgot about it.

The Covid crash was the most intense because we layered in a massive disruption to everyday life with shutdowns and quarantines. But the Covid crash was a round trip 35% decline and full recovery within a 6-month period. We were wounded, but only temporarily before the trading mania, we saw in 2021 took shape. I think we literally lost our collective minds last year. We acted like risk didn’t exist. Maybe it didn’t. The Fed had our backs.

What do all of these experiences have in common? In hindsight, there was a moment during all of them when the market made me want to throw up. It turns out, that was the moment to buy stocks. I’m not saying it was the exact day the market bottomed. No one can call the exact day of the bottom. That’s called luck. But on those puke days, I had the opportunity to put cash to work while good companies were on sale. It may not have felt great the next week, or the next month, or by year-end. But 2 or 3 years later, it was an obvious buying opportunity.

During the Financial Crisis, we wanted to throw up every day for 6 months. Many clients did. I am still haunted by the clients who bailed on their portfolios near the bottom. They locked in those losses. Those were life-altering losses, and they didn’t have to happen. Those experiences are the reason I refuse to let clients bail on their financial plans during bear markets, no matter how many gray hairs that puts on my head.

In 2018, I wrote about having the stock market blues and that down markets are the price of admission. In mid-March 2020, I encouraged investors to put cash to work. I am doing the same today. I don’t have to get the timing perfect. For larger sums, I recommend breaking it into pieces. Invest some today, some next month, and more a few weeks later. That’s the beauty of being a long-term investor. With great patience, market returns will come to you.

Now is not the time for a weak constitution. Now is the time for bravery, for adherence to discipline, and a time to hug your children, pet your dog, or go for a hike. Because the markets are likely to be rocky for while, and the news will get worse before it gets better. I envision myself calm and floating gently above the madness of the crowds – the alarmist talking heads, the flashing red headlines, the hedge funds that are certainly blowing up, and the frantic Wall Street salespeople watching their commissions evaporate. The air is nice up here. Why don’t you join me?




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