As fall falls and the temperatures signal a new season, we are reminded why we love this time of year in Wisconsin. We are replacing our shorts and swim trunks with flannel shirts and hooded sweatshirts. Even though most of us have been through the Midwest seasonal pattern for decades, every season feels new and different from last year or the year before. We know that it isn’t different. Leaf colors will change and eventually drop. Snow will fall and temperatures will once again have a minus in front of them.
The investment markets tend to run in similar cyclical patterns. Albeit not as predictable as the seasons, stock and bond markets have a familiar rhythm. Investment markets peak, then fall, eventually bottoming out before rising again. While we all know this and have likely been through the cycle, it is very easy to get lost in the noise, feeling as though this time it is different.
Proper perspective is one of the most essential traits of successful long-term investors. While it is sometimes difficult to deal with freezing temperatures day after day in January and February, we know that by April and May things will improve. It is harder to have a solid perspective when the investment markets fall and show no indication of recovery. The majority of stock and bond markets started 2022 sliding downhill and have continued that negative momentum through the third quarter. If the first nine months of 2022 were an “investment market winter,” we don’t have the luxury of looking at a calendar to tell us when spring will arrive.
Market Perspective: The Last 30 Years in the S&P 500
When I begin to lose sight of the big picture, I tend to look at history as a way to get my bearings. Here is a chart of the S&P 500 annual returns for the last 30 years.