March was a maddening month, not for basketball but all the negative headlines. We saw consumer sentiment drop precipitously from prior months, and consumer expectations about the future hit a 12-year low.[1]. And April was even worse! The markets went on a wild ride as the Trump administration made tariff announcements
The Market
Such negative outlooks may be due to the uncertainty surrounding tariffs, which also spurred talk and concerns of a potential recession.
With all these negative headlines, you might be wondering if it’s a good time to get out of stocks.
Is Selling a Good Idea?
We won’t know if this is a good time or bad time to invest until well after the fact. You can’t know these things ahead of time.
But we do know that selling stocks and trying to guess when to buy back is akin to gambling. You have to be lucky to make it work and may end up on the losing side.
Even if this ends up being a “bad time” to invest, it still pays to stay the course. Historically, investing on the precipice of major crises has been profitable for investors that stayed the course. Here are some annualized returns for investors from before the crisis:[2]
- 1987 – Black Monday +11.1%
- 2000 – Tech Bubble Burst + 7.6%
- 2007 – Global Financial Crisis +10.3%
- 2020 – COVID Crash +14.3%
Final Thoughts
While we are facing increased uncertainty with the economy and markets, the best course of action, despite how you may feel, is to stay the course. This is because the markets have a strong history of recovering and generously rewarding those investors who exercise patience and discipline. Contact us today to review your financial plan.
©The Behavioral Finance Network
[1] CBS News. Consumer confidence slumps to 12-year low as Americans fret over their financial prospects. March 25, 2005.
[2] Ritholtz Wealth Management via NYU. Returns are of the S&P 500 Index and include the reinvestment of dividends. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly. Past performance does not guarantee future results.
