With a three-day rally in the markets, many investors are feeling left behind if they had any intention of putting new capital into their portfolio, but if you recall from my recent email update (March 16), great investors think in terms of decades, not days.
In 2008, TARP (the Troubled Asset Relief Program, an $800B government bailout) was passed and the market, which had dropped 30% in the preceding three months, flattened out for the next 30 days, most likely in whole or part buoyed by the exuberance of TARP. But, thereafter the reality of the economy settled in and the market dropped another 18% over the following three months.
This may be the same pattern we are seeing today...the significant (record setting) stimulus recently passed by the Senate may be driving this three-day rally.
Nobody knows, but one possibility is after the initial rally being provided by this stimulus, the reality of our economic situation (one example being 3.25 million unemployment claims) settles in, the market may in fact continue to slide. I tell you this not to scare you, or have you attempt to be a market timer…but to let the lessons of history be your guide to staying with your retirement plan. Following the 18% slide mentioned above, the market then went on a ten-year run quadrupling in value for the patient investor (The stock market is a device to transfer money from the “impatient” to the “patient” – Warren Buffett).
As I pointed out earlier this year in an email update (February 27), staying fully invested has been the best outcome for investors. For investors with short timelines, low risk tolerance, or lacking a plan (or reinforcement of their plan), there are solutions to give you more peace of mind.
Dave & Drew