Insights: Article

Why You Should Stay Invested Through Tense Times

Crises pass, and markets eventually regain equilibrium.

September 10, 2017

We have seen some uneasy times lately. Uneasiness impacts the financial markets. When it does, we all need to keep some long-term perspective in mind. Those who race to the sidelines and exit equities may regret the choice when crises pass.

Wall Street loves calm. Traders literally want “business as usual,” every day. If breaking news disrupts that calm, it can rattle the market – but every investor must realize that these disruptive events are exceptions to the norm. (If the major Wall Street indices rollercoastered dramatically every day, who would invest in stocks to begin with?) 

History shows how the market has bounced back in the past. You probably know the old financial industry saying: past performance is no guarantee of future results. That is certainly true, but it is also true that the major indices have staged some impressive recoveries when confronted with turbulence.

We do not need to look back very far to see some of this resilience. In May, the S&P 500 posted a single-day loss of 1.8%. Just three market days later, 85% of that loss had been recovered. Remember the stunning Brexit vote in the United Kingdom? The S&P fell 5.3% in the two trading days after that news broke. It took about a week to gain all of that back.1

When China startlingly devalued the yuan in August 2015, there was a true correction in the S&P; it lost 11%. In roughly two months, it was back at its former level.1

Looking back further, we can be encouraged by how stocks rebounded after the unthinkable shock of 9/11. Wall Street was closed for five calendar days after the attack; on September 17, 2001, the Dow slid 7.1% (684 points). It would eventually drop more than 14%. The S&P 500 retreated 11.6% during the week when the market reopened. Even so, one month later, the three major U.S. equity benchmarks had recouped their losses.2

Stock market corrections happen regularly. In fact, this current period is one of the calmest on record. As the summer of 2017 wraps up, the S&P 500 has gone more than a year without a 5% dip. The last stretch this long without a 5% pullback was in 1995, and this has happened only six times since 1950.3

Back on May 17, the Dow slipped 373 points. Yet with the index comfortably above 20,000, that single trading session saw only a 1.8% retreat. A 1,000-point, single-day fall for the Dow 30 is now a possibility. If the Dow drops 1,000 points in a day for the first time, investors will be shocked – but they should remember that the Dow also rises.4

 

Financial Advisor offers Investment Advisory Services through Eide Bailly Advisors LLC, a Registered Investment Advisor. Securities offered through United Planners Financial Services, Member of FINRA and SIPC. Eide Bailly Financial Services, LLC is the holding company for Eide Bailly Advisors, LLC. Eide Bailly Financial Services and its subsidiaries are not affiliated with United Planners.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - businessinsider.com/stock-market-news-buy-the-dip-bulletproof-rebound-2017-8 [8/15/17]

2 - investopedia.com/financial-edge/0911/how-september-11-affected-the-u.s.-stock-market.aspx [9/11/17]

3 - investopedia.com/news/why-stock-market-correction-may-rattle-investors/ [7/18/17]

4 - latimes.com/business/hiltzik/la-fi-hiltzik-market-corrections-20170530-story.html [5/30/17]

Latest Insights

September 21, 2018
Article
In the wake of hurricanes, devastating results have been experienced by communities and businesses throughout the Texas Gulf Coast, Caribbean, Florida and southeastern United States. As a result of these catastrophes, businesses will turn to…
September 20, 2018
Firm News
Eide Bailly LLP announced the winners of its 2018 Nonprofit Resourcefullness Awards, recognizing creative and sustainable revenue ideas from nonprofits in Arizona, Colorado, Minnesota, North Dakota and Utah.
September 19, 2018
Article
The IRS has started sending out Letter 5699 asking businesses to verify if they should have filed Forms 1094/1095-C. These forms are required for all ALEs.
September 19, 2018
Recorded Webinar
Are you considering doing business or having employees in Pennsylvania? Have you had issues with your state tax filing? Join our state and local tax team for some helpful insights into Pennsylvania tax filings.
September 19, 2018
Recorded Webinar
Are you considering doing business or having employees in Nevada? Have you had issues with your state tax filing? Join our state and local tax team for some helpful insights into North Dakota tax filings. This webinar will cover registration,…
September 19, 2018
Recorded Webinar
Are you considering doing business or having employees in North Dakota? Have you had issues with your state tax filing? Join our state and local tax team for some helpful insights into North Dakota tax filings. This webinar will cover registration,…
September 18, 2018
Article
As the largest tax reform legislation in the past 30 years becomes reality, it is important to stay up-to-date on planning opportunities and how reform may impact you and your business. Our Tax Reform: Practical Insights examples aim to break down…
September 18, 2018
Tool
Get ahead of tax season with the Eide Bailly Tax Planning Guide. A supplemental strategy guide to help guide year-end and make the tax laws work for you.
September 18, 2018
Article
The SCOTUS Wayfair decision has prompted a new focus on state and local tax compliance. The decision to register, report, and comply is important.