Climbing the wall of worry

As the "Wall of Worry" appears to grow brick by brick, ever taller, its easy to see why investors begin to question their financial plan and ask questions like, "Why am I invested now?".

 "Imagine it’s 25 years ago, 1997:

A stranger offers to tell you what’s going to happen over the course of the next 25 years. Here’s the big question: Would you invest in the stock market knowing the following events were going to happen? And could you stay invested?

  • Asian contagion

  • Russian default

  • Tech collapse

  • 9/11

  • Stocks’ “lost decade”

  • Great Recession

  • Global pandemic

  • Second Russian default

With everything I just mentioned, what would you have done? Gotten into the market? Gotten out? Increased your equity holdings? Decreased them? Well, let’s look at what happened. 

From January of 1997 to December of 2021, the US stock market returned, on average, 9.8% a year. A dollar invested at the beginning of the period would be worth about $10.25 at the end of the period". 

The uncertainties that make up the current "Wall of Worry" are a unique blend, but that wall has always loomed throughout every decade and generation and despite a rollercoaster of emotions, markets prevail.

Market Sentiment and Forward Market Performance

This chart shows the average forward market performance of the S&P 500 1 month, 3 months, 6 months, and 1 year after various ranges of market sentiment. Historically when investor sentiment has been this bearish, (Bull/Bear spread sentiment indicator at -60) forward returns going out one month to one year have been very positive. Despite the headlines, market bottoms are typically formed in times like this when no one can find anything positive on the horizon.

 

What Else We’re Reading

 

Legacy Trust Family Wealth Offices

 4200 Marsh Landing Blvd, Suite 100

Jacksonville Beach, FL 32250

Office: (904) 280-9100

Fax: (904) 280-9109

 

Legacy Trust Family Wealth Offices of Jacksonville Beach, Florida, is a new type of financial services firm - an independent multi-family office - that brings all facets of your personal financial affairs under one roof, where they are coordinated for optimum efficiency and maximum performance. 

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