Special to the Recorder
“Oh, my!” The trademark exclamation coined by Dick Enberg, one of the most prominent and respected play-by-play sports announcers in network television history, is a good way to express what happened in the financial markets since Donald Trump won the presidential election. Since the presidential election, the S&P 500 is up 11.4 percent excluding dividends (as of 4/28/2017), and the Dow is now over 20,000 (as of 04/28/2017)! This so-called “Trump Rally,” just like the entire 2009-2016 bull market, which pushed up stocks more than 200 percent, has, of course, its detractors. As my favorite bean counter (economist) Brian Wesbury says, “We heard it over and over in the past eight years, and now we hear it again – the market has moved too far, too fast. This rally, they say is based on ‘Hope and Faith.’ After all, nothing has changed yet. It is just dreaming.”
While I understand the doubter’s position, my response is that instead of asking why the market is up, we should be asking why it was not rising much more before. Do you remember January of 2016, which I refer to as the Great Panic of 2016? During the first two weeks of that year the stock market, measured by the S&P 500 index, declined 8 percent. This decrease was the first time we were down that much that early in the year in over three decades! Furthermore, many “head-for-the-hills” doomsayers masquerading as sophisticated investment analysts were predicting an alarming scenario that called for a repeat of 2008. They wanted us to think the unthinkable. As Charlie Brown would say, we were doomed.
Of course, these pouting pundits of pessimism were wrong once again, but as we know, it is only a matter of time before we have another decline, perhaps of 5 percent or more. Therefore, we should always be prepared so that when the messenger of misery pays us a visit, we will not hit the panic button because we understand that volatility and stock market declines are the prices we must pay to earn above average returns. History has clearly taught us that periodic crises are inevitable, but recovery has always followed. Consequently, I am mentally and financially prepared for adverse stocks market conditions because they are normal and expected. If we cannot wrap our mind around the notion of periodic gut-wrenching declines, I suggest that we wave the white flag and surrender our involvement with the game of investing. As difficult as it is, we must have perseverance and self-control during the inevitable stock market declines.
Allow me to conclude this column by sharing with you a thought provoking and encouraging analysis performed by the highly respectable firms Morningstar Direct and Ibbotson. According to the authors, from 1965 to 2014 when the S&P 500 (stock market) declined more than 10 percent but less than 20 percent, the mean time for the market to recover from its losses has been only 107 days, or shorter than an NFL season, which always seems to go by far too quickly.
Harry Pappas Jr. CFP®
Master of Science Degree Personal Financial Planning
Certified Estate & Trust Specialist ™
Certified Divorce Financial Analyst™
Pappas Wealth Management Group of Wells Fargo Advisors
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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 to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.