on August 9, 2022
For many people, summer is a time for relaxing at the beach, barbeques, gardening, and enjoying the sunshine. But for the stock market, things aren’t usually so rosy. Historically, the summer months are less-than-spectacular for market performance. Activity tends to slow, and both the S&P 500 and Dow Jones Industrial Average tend to decline over the summer.
This lackluster performance has caused some to live by the axiom, “Sell in May and go away.” And today, that sentiment is even more tempting. Aren’t we now officially in a bear market? Aren’t we teetering on the brink of a recession?
Maybe, but I’m not worried (and neither are my clients). And I certainly do not advise following that very flawed axiom.
For one, all the handwringing and doomsaying we see on the news or read on social media is often overblown. When was the last time you heard a positive financial report? Or an optimistic prediction for the market? Despite Americans having less debt than they’ve had in 30 years (!!), the media continue to either ignore this fact or put a pessimistic spin on it. Take this recent Wall Street Journal headline, for instance:
“Americans Were Great About Paying Their Debts in the Pandemic. Don’t Expect It to Last.”
Why not focus on the first part and celebrate our financial prudence? Why add the note of negativity? Because, frankly, negativity sells. When you see a headline like this, take it in stride. Do your own research, fact check, and talk to your financial advisor.
The second reason my clients aren’t worried about a summer slump is because we’ve been here before (many times), and we’ve always weathered the storm. When I say “we,” I am referring to both my clients in particular and the nation, in general. Many of my clients have lived through the ‘70s and ‘80s; they’ve seen volatility, precipitous drops in the market, and ultra-high inflation. And they know better than to try to time the market.
The market always corrects itself. We have many decades of data to back this up. Sometimes the slumps are painful, but we always get through them and are rewarded for our patience. When it comes to investing, long-term thinking has always proven to be the winning strategy.
So when you read or hear about a summer slump in the market, don’t panic! The market is behaving how it sometimes does during the months between May and October. This is nothing new, and kneejerk reactions will likely be rewarded with regret. Remember the market’s rapid decline in March, 2020? Remember how hordes of investors sold off their equities…only for the market to rise rapidly over the next two years? Remember how the U.S. Market index hit an incredible 66 new highs over 2021? Anyone who pulled their money was forced to reenter the market at a loss.
This summer, keep calm. Trust the natural ebb and flow of the market, talk to your financial advisor, and resist making impulsive decisions. When you’re sailing through stormy financial seas, it’s best to stay the course and wait for the sun to shine again (believe me, it will).