Good Morning,
I hope this note finds you happy, healthy, and enjoying the brief but lovely glimpses of spring. With so much noise in the headlines lately, I wanted to take a moment to offer a little perspective.
Over the last century, there have been countless heartbreaking and sometimes catastrophic events, any one of which might have seemed like a perfectly reasonable moment to avoid investing in the stock market. For us "vintage folks", the 1960s and 1970s alone were filled with profound uncertainty: the Cuban Missile Crisis, the assassination of President Kennedy, the Vietnam War, Watergate, and the energy crisis, to name just a few. In more recent history we have experienced the unthinkable with the attacks of September 11th. We have also endured the global financial crisis and recession from 2007–2009 and the COVID-19 pandemic followed by a surge in global inflation. Today’s headlines surrounding tensions between the United States and Iran are simply the latest reminder that the world rarely feels completely settled.
Market pullbacks can feel unnerving to put it mildly, but history reminds us that they are a normal part of investing. Since World War II, the S&P 500 has experienced a decline of 10% or more roughly every year or two, yet the long-term trajectory of the market has remained upward. Even investors with remarkably poor timing have historically been rewarded for remaining invested in the market. Consider an investor who put $10,000 into the S&P 500 at the absolute worst moment before the financial crisis in October of 2007. Over the following 17 months, the market plunged nearly 57%.....one of the most severe declines in modern financial history. For a time, that $10,000 investment would have fallen to roughly $4,300. Yet investors who resisted the urge to sell and simply stayed invested, reinvesting dividends along the way, saw that same investment grow to roughly $50,000 today. Along the way they would have lived through multiple corrections, the COVID crash of 2020, and the bear market of 2022. History repeatedly reminds us that some of the market’s strongest days occur very close to its most volatile ones, which is why missing just a handful of those recovery days can dramatically reduce long-term returns.
Studies in psychology have shown that the information we focus on shapes how we see the world. People who intentionally notice positive developments tend to feel more optimistic about the future and often make better long-term decisions. Of course, focusing on the positive isn’t always easy in a world of social media and 24-hour news cycles....but it is possible. In the spirit of hope and optimism, it’s worth remembering that remarkable progress is quietly unfolding around the world every day. Advances in artificial intelligence are accelerating medical research and helping scientists identify promising new drug therapies in a fraction of the time it once took. AI systems are assisting physicians in detecting cancers earlier and improving diagnostic accuracy in fields such as radiology and cardiology. Breakthroughs in energy technology are making renewable power more efficient and affordable, while global life expectancy and living standards have steadily improved over the past several decades. In agriculture, new technologies are helping farmers produce more food using fewer resources.
Even in nature we see powerful examples of resilience and hope. Many people have followed the story of little Punch, a baby Japanese macaque born at the Ichikawa City Zoo in Japan. After being abandoned by his mother shortly after birth, Punch had to be hand-raised by caregivers, and his eventual introduction to the troop was uncertain. At first he struggled to find acceptance and was bullied and rejected by the group, often clinging to a small stuffed monkey for comfort and companionship. But the story doesn’t end there. Over time, the troop began to tolerate him, and eventually several members started to care for and protect him as one of their own. It’s a small but powerful reminder that patience, persistence, and resilience are often rewarded. In many ways, long-term investing asks us to practice that same patience and resilience.
While the headlines of the moment can feel loud and worrisome, history reminds us that resilience, innovation, and human ingenuity continue to move the world forward. Markets have navigated wars, crises, and uncertainty countless times before and have repeatedly found their footing again. Just as little Punch eventually found his place within the troop, economies and markets have a remarkable ability to adapt and recover over time. By keeping our focus on the long term and tuning out the noise of the moment, we allow patience and discipline to do what they have historically done best.
Wishing you a wonderful weekend ahead and a reminder that we are here if you need us!
Johanna