If you recently got a statement from your retirement account or other investment account and have been meaning to look at it, don’t. The past 4-and-a-half months have not been kind to investors. The S&P 500 is down 14%. The Dow is down 10%. The NASDAQ is down an eye-watering 23%. The Euro STOXX 50 is down 13%. Even the US Bond index — usually a safe haven when stocks get funky — is down 9.5% (all percentages as of close of business on May 17th, 2022). It’s rough out there. There’s nowhere to hide in the markets and cash-in-the-bank is still giving nothing.
And don’t come at me with any “this is crypto-currencies time to shine!” nonsense. Crypto has been taking it even harder than equities. What was supposed to be a diversifying asset class is showing its true colors as a speculation bet. But what would you expect from something based on nothing tangible? It’s easy to see success when the world is flush with cheap cash looking for a place to go. It’s a whole other thing when the charts start flashing red. I learned this lesson from a stock market simulation during my senior year of college. Everyone in the class was crushing it with their fake investing, and our professor looked at us and exclaimed, “Of course you’re all up! The market is up! It isn’t hard to do well when everything is rising.”
There’re many reasons why investments are pulling back. Go ahead and pick your favorite: ongoing pandemic/endemic, supply chain disruption, aggressive American stimulus, housing shortage, Russian delusions of grandeur, inflation, rising interest rates, the list goes on. The reason could be as simple as investors looking back on the incredible past three years of market performance and saying this party needs to chill.
It’s not just that the market is down. If you’re watching the numbers (which I don’t recommend), you’ll see that investments have been swinging wildly. We’ve been up, we’ve been down, we’ve been sideways and it’s been the worst type of roller coaster. Day-to-day, the action has been enough to make even the strongest stomach want to toss it’s cookies.
We like to think money is all hard math and logic, but that’s not really how it works. Money isn’t rational. Money is emotional. When you think about your money, you think of what you can do with that money. We think of money in terms of the future and the possibilities it can provide.
Which is why losing money hurts so much. It actually hurts a lot more than making money. Twice as much, to be precise. When our investments go down we subconsciously know that means opportunities have been lost. We fear not being able to live the life we dream of. This is why it is so important to lay out a plan. You have to focus on the long-term goal past this short-term set-back.
Yeah, it’s rough out there. But make sure you’re looking for the rainbow after the storm, and you’ll be just fine.