This Has Been a Test: Have you Learned from Market Uncertainty?

The past 3 years were a good test for the prudence of your investment plan.

Think back to December 2019. The economy was humming. Unemployment, interest rates, and inflation were at historically low levels. But then what happened?

• A global pandemic hit. The S&P 500 dropped nearly 20%
• FAANG stocks soared…before giving up a lot of gains
• Meme stocks shot way up….and fell
• Bitcoin reached record highs…then crashed
• Inflation spiked to the highest levels most of us have ever experienced
• And Russia invaded Ukraine, sparking a humanitarian crisis and geopolitical uncertainty

We don’t know anyone who predicted all of that back in December 2019. But what if someone had? What would you have done?

Next question: What if that person told you that, despite all that news, the Russell 3000 would average a return of 10% a year over the next three years? Would you have believed them? Would you have stayed in the market?

Because that’s what happened. A yearly return of 10%! That’s pretty darn close to the stock market’s historical average over the past century.

You Can’t Outsmart the Market

The conclusion we hope you reach is that it’s unrealistic to think you can outguess markets. You’re probably better off expecting that markets will do their job of capturing the human ingenuity taking place every day across thousands of publicly traded companies around the world.

What do we mean by markets doing their job? When news of the pandemic hit, markets adjusted, and prices went down. In other words, when uncertainty peaked around March 2020, investors needed assurance before jumping back into the market. Then, when news of a vaccine spread, investors adjusted accordingly. In the short term, there are often wild swings up or down. Making a change during either can be dangerous.

The past three years were a good test for the prudence of your investment plan. Take a moment to think about why you did what you did and prepare for next time. Because the next three years may be just as uncertain.

First, we made sure your investment plan is sensible and based on financial science. Second, we made sure it’s realistic for you and your unique situation. Even the greatest plan is insufficient if you can’t stick with it during tough times.

We don’t make predictions, but we do believe in the power of human ingenuity to fix problems big and small, innovating the whole way. What has stayed constant is the power of people to make progress in the face of challenges.

We’ve seen it in the fight against COVID-19—vaccines developed at lightning speed are now being administered around the world. We’ve seen it in the continued progress of gene therapy, which is revolutionizing the treatment of multiple diseases. As we start 2023, let’s remember the lessons of the past three years. Let’s reinforce—and stick to—plans that take us through the short-term ups and downs of market fluctuations so we can capture the long-term benefits of human ingenuity.