Not since childhood, when we were counting the school days left between spring break and summer vacation, has our patience been so sorely tested as it has since last March. In fact, thanks to the coronavirus pandemic, perhaps we are living through one of the largest-ever tests of our patience, as we painstakingly assess when we can start emerging from the shelter-in-place mandates.
At least the experience may serve as a reminder of how your investing will require the same degree of patience. All evidence suggests that staying invested according to plan remains among the best ways to continue accumulating meaningful wealth over time. But we must emphasize that qualifier: over time.
The Shifting Shape of Recovery
While global markets have delivered ample rewards over the long-term, it almost always has required industrial-strength patience to successfully reap those rewards. It almost certainly will require the same moving forward.
We remain confident in the power of our resilient markets to ultimately recover and prevail. But you’re best off patiently ignoring anyone who pretends to know exactly what shape the recovery will take over the coming months or years.
Will it resemble a fast-and-furious letter-V? Will it look more like Nike’s swoosh, with a gradual return to normalcy? Or might the recovery play out as a wilder, letter-W ride? We’ve seen these and still more predictions posed. If we were the wagering kind, we would assume a coin toss would be about as dependable as any of them in determining what the future holds.
Uncertainty Over Time
Recent market performance illustrates our point. Until it happened, nobody would have guessed the S&P 500 would set a new record in March for its fastest-ever 30% decline in just 22 days. The decline even beat out several nearly-as-rapid 30% drops during the Great Depression. Then, in a sudden April whiplash, the S&P 500 and the Dow staged their most remarkable monthly recoveries since 1987.
The common denominator here is an unknowable future. Stock market recoveries often come in fits and starts that frustrate investors and push our patience buttons. Be prepared to battle your patience limits again as this recovery unfolds. That’s perhaps the only knowable outcome we should plan for.
Patience as a Process
As a fiduciary financial advisor, we adhere to core beliefs that guide our investment management philosophy. We ground our beliefs in a disciplined process for focusing on what we can control. Key controllables include thoughtful cash-flow planning, strategic asset allocation, global diversification, minimizing investment costs, being tax-efficient, and sticking with a prudent financial plan.
While Covid-19 threw an enormous roadblock across our path, we firmly believe these principles still apply today – and will continue to apply across whatever weird shape the stock market’s expected recovery might take.
This is why we remain as passionate as ever about helping investors patiently navigate through the good times and the not-so-good times … even if our hair has gotten pretty long while we wait.