Gut Check

Gut Check

September 26, 2023

At the beginning of this year, I wrote a blog post imploring you all to take a step back and look at last year’s investment returns with the perspective of the past. You can find that post here, but the brief summary is that 2022 was an historically bad year for the market coming off the longest bull market run in the history of the stock market. Now that we are nearing the final quarter of the year, I thought it might be a good idea to do a quick “gut check” to see where we are at so far this year in relation to 2022.

                If there is one number that everyone cares about it is the overall performance of the stock market! As I mentioned in my prior post, 2022 recorded the all-time 7th worst performance for the S&P 500 Index at -19%. Thus far in 2023, the market has rebounded to the tune of 12.98% (as of 9/26/2023). This has been a welcome improvement for investors and a trend that many hope will continue through to year end.

          If you are anything like me, it probably helps to see what those percentages look like in real numbers. To give you an example, let’s assume you had $100,000 in your investments at the beginning of 2022. If your investments closely tracked the market (in this case the S&P 500 Index) where would your investment be today? Take a look at the chart below:

As you can see, your hypothetical current balance would be around $92,570 up from a low of about $76,000 in October of last year. It should be noted here that this is purely an example as you cannot invest directly in the S&P 500 Index although many funds do follow the index closely. While still being down almost $8,000 in this example is by no means good news, it is still encouraging to see the market bounce back from its lows last year.

                     The experience of this year and last in the markets provides us with some key reminders moving forward. First, holding on through the market doldrums is generally the best strategy for the majority of people. Had you panicked and sold your investments near the bottom of the market in 2022 you would have missed the positive returns of 2023 which would have made it much more difficult to recoup your losses! I am beginning to sound like a broken record but don’t make the “Big Mistake”!

                     Secondly, having an objective for your investments is vitally important to keeping your wits about you in a down market. If your goal is simply to “make money” in any market cycle you are going to drive yourself crazy and likely make some emotional investing mistakes. If you investment goals are less ambiguous and also articulated in a financial plan, it is much easier to take years like 2022 in stride. Not sure where to start with a financial plan? Check out our free financial planning tool, RightCapital! You can create a login here to get started. For more information on the tool check out this brief video introduction:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

No strategy assures success or protects against loss.