From Glen’s Desk - March

After a thirteen-year rise from a devastating Global Financial Crisis low on March 9, 2009, the Standard and Poor’s 500-Stock Index (S&P 500) reached a closing level of 4796.56 on January 3, 2022.¹

A little over two years later, on January 19, 2024, the S&P 500 surpassed that record high by reaching 4839.81.²

While the S&P 500 was between those two milestones, a tragedy was simultaneously occurring. This tragedy is no fault of the market’s; it is a wholly human tragedy. Indeed, this tragedy is not even directly related to the market itself. Between January 3 and October 12, 2022, the S&P 500 equity market declined approximately 25%.³ This, in and of itself, is not tragic. Since the end of World War II, the market has seen declines like this happen routinely.⁴

It is the way that people reacted to this decline that constitutes the true tragedy. Put simply, selling off your long-term equity investments due to fear, only to later see those same investments reach new record highs, is a very tragic – and easily preventable – outcome for many investors.

In 2022, there were several very compelling global events that caused the market to take a downward turn. Indeed, we were constantly reminded of these events by the 24-hour financial news services, which often used very alarmist rhetoric to frighten investors. Realistically, however, every single equity market decline of any substance has been driven by negative social, economic, political, financial, or geopolitical phenomena. In all likelihood, every significant future decline will also be driven by some mix of those events.

Most recently, we experienced inflation at a rate unseen in 40 years.⁵ The Federal Reserve (Fed) responded to the inflation with the sharpest interest rate spike in its 110-year history.⁶ Many investors feared that these events would force the market into a recession. Corporate earnings fell, though briefly, and war ravaged Ukraine.

Despite the chaotic times, good companies did what they have always done. They prioritized the preservation of their owners’ capital, merged strategically with weaker companies in distress, and focused on innovating. As the world spiraled about the possible demise of the stock market, there was a groundbreaking technological breakthrough in artificial intelligence. This breakthrough has led to significant increases for many leading technology companies.

As these events occurred, it is important to note that there has been no recession so far. Four million jobs have been added since the market low in October 2022.⁷ Inflation has continued to decline, and retail sales remain strong. With inflation decreasing, many journalists focus on when the Fed might lower interest rates.

It seems as if the numerous crises that sent the market into a 25% decline have passed. And now the equity market is reaching new highs. That, put simply, is what it has always done.

Investors may be tempted to focus on the sometimes very dark and deep valleys between the almost inevitable new highs of the stock market. That is when the previously mentioned tragedy most often occurs. Instead of falling prey to this very preventable tragedy, I would encourage you to stay the course. When in doubt, talk to your financial adviser. Make sure that whatever step you take is motivated not by fear but is instead informed by decades of experience. If you would like to discuss this in more detail, please reach out to one of our talented financial advisers here at GDS Wealth Management. Call (469)212-8072 or visit www.gdswealth.com. We would love to discuss this with you in more detail.

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¹ Barron’s, 2023.

² CNN, 2024.

³ Yahoo Finance, 2024.

⁴ Investopedia, 2023.

⁵ The Guardian, 2022.

⁶ CNBC, 2022.

⁷ U.S. Chamber of Commerce, 2024.