If you are easily offended, I urge you to turn the page as I am going to be real with you; the raw and uncut version. This isn’t your grandma’s house, and I am not going to bake you cookies and coddle you. We are in the big leagues where investing is dangerous game. I suspect that much of your financial problems are caused by one person, you. If you are one of the crybabies that repeatedly play the victim card by blaming the government, your financial advisor or corporate America for your troubles, you should focus on what you can change … you. Ah! I feel much better now that I got that off my chest. We can now take a more academic approach to the subject matter. I sense that you might be getting annoyed and a bit irritated with my mode of expression. If so, I apologize for my candor and bluntness, but I feel so strongly about this subject that I want and need to get your attention. I don’t want you to make similar mistakes that far too many have, especially during times of panic and euphoria. Sadly, these folks now rest in the Wall Street graveyards, as they learned the hard way about what follows.
The 2020 Covid stock market crash was an ugly and sudden global debacle that began on February 20, 2020, and ended on April 7, 2020. During this time, boatloads of investors bailed on their long term-game plan by succumbing to fear and dumping their stocks only to look back and realize their action was a mistake, especially when the stock market (S&P 500) has doubled in price from Covid bottom set on March 23, 2020, ending August 15, 2021! If you stayed the course, I applaud you for your discipline and perseverance. During the fiasco, if you were among the few that added money to you stock portfolio, I tip my hat to you in admiration! In any event, I think the remarkable advance to record highs during such a troubling time deserves a brief stroll down memory lane. The economic and stock market collapse started on March 9, 2020, when the Dow Jones Industrial Average (Dow) fell 2,014 points, a whopping 7.79% drop. Three days later, the Dow gave up another 2,352 points, just shy of a 10% beating, which entered the record books as the sixth-worst percentage drop in history. Then, a few days later, on March 16, the Dow plummeted nearly 3,000 points to close at 20,188, losing another 12.9%. When the stock market mess finally ended, the Dow lost an astonishing 37% in value in 29 trading days (February 12 to March 23).
During this anxiety-ridden time, fear was rampant, and the United States soon went into lockdown. Over 20 million jobs were lost, businesses closed, and the virus continued its attack with a vengeance. What was arguably more astonishing was that when the market bottomed, it took only 354 trading days for the S&P 500 to do the double. This implausible rise seems utterly confusing and counterintuitive, as there was a disconnect between the economy and the stock market. In other words, the economy was in a tailspin, but stocks moved higher! This dichotomy actually makes sense if we heed the wisdom of Baron Rothschild who said, “The time to buy is when there is blood in the streets.” This advice is what contrarian investing is all about, which is the belief that the more troubling things seem, the better the chance to make money. Of course, this wisdom is much easier to say, read and write than it is to put into practice. Nevertheless, it begs the question; why are most folks so afraid to step up to the plate (invest) when stocks get cheaper … a lot cheaper, akin to the Covid crash? The answer is simple and straightforward; it is in our DNA to run for cover when things get bad. Most sell and ask questions later. Buying was not even a consideration for the majority, as investors were scared to death that the stock market would keep dropping with no end in sight. Therefore, it seemed prudent and rational to sell and wait until things settle down and the news gets better before heading back into the water. Nope! Nope! Nope! The game doesn’t work that way, as history has proven repeatedly.
The stock market constantly gives us opportunities like it did with the Covid crash, but I suspect only a handful of investors were brave enough to take advantage of the hysteria even when we know that history has proven time after time that when the herd thinks the world is going to end, it is often the time to buy … certainly not to sell. Folks, there is always a lesson in our pain, as adversity creates opportunities. It is up to us to recognize and seize the moment, but before we can capture the opportunity, we have to conquer the battlefield of our mind, as it is our biggest enemy! The next time the messenger of misery pays the stock market a visit, I want you to be one of the few that don’t panic and steps up to the plate and hit it out of the park! Stay emotionally prepared and be ready to pull the buy trigger. I believe in you, my bruddahs and sistas!
Harry Pappas Jr. CFP®
Managing director-investments; Master of Science Degree Personal Financial Planning; Certified Estate & Trust Specialist; Certified Divorce Financial Analyst
Pappas Wealth Management Group of Wells Fargo Advisors, 818 North Highway A1A, Ste 200, Ponte Vedra, FL 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.
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The opinions expressed in this report are those of the author(s) 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.
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.
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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.
