Broker Check

Monday Money Report

| May 23, 2022
Share |

We are officially in bear territory. The S&P 500 is down just over 20% from the all-time high set on January 3rd.  This is scary.  The closer you are to retirement, or if you’re in retirement, the scarier it gets.

It’s important to take a longer-term perspective. In all the years we’ve had a stock market, we see that about one of every three years is negative. Since 1970, we’ve had seven negative five-year periods; meaning, if you had invested at the beginning of that period, you would have less in five years that what you invested. We’ve had two negative ten-year periods.  And we’ve never had a fifteen-year negative period in stock market history.[1]

 While your accounts may be down, unless you’ve sold and are now holding cash, you haven’t actually lost anything. If you had 10 shares of Spacely Sprockets in January, you still have 10 shares of Spacely Sprockets today. You just can’t sell them for as much as you could in January. Let’s say that stock was worth $100 a share in January.  You had $1,000 of Spacely Sprockets: ten shares times $100. With a 20% drop, you have $800 of Spacely Sprockets if you sold right now – but you still have ten shares. If you hold and wait for the market to recover, you should be able to sell those 10 shares at $100 each.

Here’s the best part.  If you keep investing, contributing to your retirement accounts with each paycheck, you’re buying 20% more shares. Let’s say we now have 12 shares of Spacely Sprockets at $80 a share. When the market eventually recovers, our investment isn’t worth $1,000 – it’s $1,200, because we have more shares.

We’re sending you back to your phones for your action item this week.  Pull up the stock market app on your phone, and click on the S&P 500. Move the time horizon to “all”.  You’ll see the stagflation of the early 80’s, Black Monday in 1987, the tech bubble bursting, the Great Recession, the pandemic. But what you’ll really see is that the market has returned, on average, 10.5% a year.[2]   

There’s more information on our Facebook page, and our website at covingtonalsina.com.

Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. 

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.


[1]https://en.wikipedia.org/wiki/S%26P_500 (all data in paragraph)

[2]https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp#:~:text=The%20S%26P%20500%20index%20acts,its%201957%20inception%20through%202021.

Share |