I admit, being your investment advisor over the last few years has been pretty enjoyable. Overall, the market has been very friendly. I reflect back to the 2000, 2008 and 2012 market events and I want to pause and be grateful for the good years.
And while the last three years have produced very acceptable returns for the average investor, that hasn’t meant there weren’t still some difficult, stomach-churning months. In fact, there were three eye-watering drops in that period.
So, I think this is a good time to remind us that corrections are a part of the market moving higher. It is easy to think of them more as an interruption – but they often really are part of the process of a market moving higher over time.
I grew up in rural Oregon. There I learned a lot about forests and logging, much like Oklahomans grow up learning about oil. One thing about forests is they will be managed. Forests are either managed by selective forestry (cutting out some of the old growth and making way for light to come in and support new growth) or from giant, uncontrollable fires (that destroy all the trees and then reset thousands of acres to start over from scratch).
Corrections (typically a market falling more than 10%) happen almost every year. Rotation (money moving from one group of investments that are seen as overvalued to another segment viewed as more desirable) happens almost constantly. These internal actions often help maintain the long-term health of the market and the economy as a whole. When corrections and rotation are pushed back for too long, large “fires” can do serious damage.
Knowing this does not make these events any more enjoyable. But when we see the purpose of these actions, it allows us as your advisors to attempt to better rebalance accounts to what will grow next and/or from what looks too “flammable” to hold on to.
Another recession or bear market is always ahead. As long as the world keeps turning, that will remain true. But while these events are challenging, they also create opportunities to prepare for the next move up. If you need someone to talk to through the up and down – let us help!