Accept and prepare for significant stock market declines

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Let’s take a stroll down memory lane. The time was January 2016. There is no diplomatic way to articulate what happened with the stock market at that time, except to say that we were in panic mode! Investors had to decide whether they wanted to go with the conventional bearish wisdom, and bail on stocks.

The Dow Jones Industrial Average hit the low of Feb. 11, 2016, when it bottomed at $15,660. Yep...sure would have been a nice time to add stocks to one’s portfolio, but when people are in the midst of a major hurricane of sorts, they often do not think clearly or rationally. Nevertheless, the Dow closed the year at $19,974.62.

The move from $15,600 to $19,974 was, of course, not straight up. In fact, there were many scary moments thought the year. But once again the stock market, measured by the Dow Jones Industrial Average, climbed the proverbial “Wall of Worry” as it ascended to close just short of $20,000.

Indeed, nobody would think one was a genius for staying the course or better yet, buying stocks when there was blood in the streets. Nope, crazy was more like it! However, at least for now, some of the “crazy” ones are coming out ahead!

When we are in the middle of so much anxiety and folks are stampeding to the exit door, it is hard to recognize that the theater is not on fire. Nevertheless, it was déjà vu all over again, as far too many folks hit the panic button and their rational thinking went out the window. When selling stopped, and all the bears were exhausted, there appeared nothing else to do but buy! This is called capitulation! Regardless, many investors apparently believed this was going to be the first time in market history that the market went down and stayed down forever.

“Mr. Market” did it again! He made fools out of those who bet on the demise of the stock market. Of course, nobody knows what the future holds for stocks. In fact, the doomsayers will perhaps be right at some point, but for the past seven years, the alarmists have been dead wrong! I know that you understand that we will experience more gut-wrenching declines at some point. Regrettably, that is how the “game” works. I encourage you to accept and emotionally prepare for the pending significant decline in stocks. Heck, it could begin as I type these words, or we may not witness a meaningful downturn for years.

In other words, it is not a matter of if, but when. Therefore, how will you react when the inevitable time arrives? As I have been saying for 32 years, keep your finger off the panic button during times of turmoil. As difficult as it is, I encourage you to bite the bullet and allow the process to run its course. Yes, easily said, but not so easily done!

Harry Pappas Jr. CFP®

Managing Director-Investments

Master of Science Degree Personal Financial PlanningCertified Estate & Trust Specialist ™

Certified Divorce Financial Analyst™Pappas Wealth Management Group of Wells Fargo Advisors

818 North Highway A1A, Ste 200

Ponte Vedra, Florida 32082

904-273-7955

harry.pappas@wellsfargoadvisors.com

The use of the CDFA™ designation does not permit Wells Fargo Advisors or its Financial Advisors to provide legal advice, nor is it meant to imply that the firm or its associates are acting as experts in this field.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a Registered Broker-Dealer and a non-bank affiliate of Wells Fargo & Company.

This and/or the accompanying statistical information was prepared by or obtained from sources that Wells Fargo Advisors believes to be reliable, but its accuracy is not guaranteed. The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. Any market prices are only indications of market values and are subject to change. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.

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