Think back a year ago. Worries were many – China and Europe’s economic data, the collapse in energy prices, a possible US recession, etc. Global stocks had entered a bear market and many companies’ share prices were down 30% or more from their highs. A leading investment bank even issued the proclamation to “Sell everything”. Yours truly, who roots for bad news and sell-offs which allow us to take advantage of them, was even feeling sick! Recall that in 2015 we had repositioned many portfolios during the sell-off but prices continued downwards.
We shared the chart from Returns 2.0 with many of you. The chart analyzes past bear markets and what happens to prices one to five years out after stock prices have already fallen by 20% (hint: it’s too late to sell).
As we approach the one year anniversary, if recent gains hold, we can fill in the ?? for 2015-2016 (see the red circle below). The world stock market index has bounced nearly 20% – almost identical to the average.
Stick to your plan, diversify and most importantly tune out the news. Do not let fear or greed hijack your portfolio.