A single moment can be powerful. It can be powerful enough to change your life forever. It happened to me…fortunately for the better. And my simple advice is, pullbacks and corrections aren’t a signal to run for the hills. They are opportunities for us to buy things like the S&P 500 ETF Trust (SPY), writes Matthew Carr, editor of Tipping Point Profits.
In my 20s I was working for a financial publishing company in Washington, DC. Our offices overlooked the White House and the heart of the political capital of the world. I specialized in crude oil, natural gas, liquefied natural gas (LNG), and a host of other commodities. I built price and trend reports for the trading hubs.
For years, the markets were booming. But they suddenly – and abruptly – took a turn for the worst. A lot of people were scared. I was scared.
I asked my boss at the time, “Should we tell our people to sell? Should we move to the sidelines?” What he said to me next changed the way I thought about markets and about volatility. And it changed my life completely.
He walked over to my desk and told me, “Pull up an all-time chart of the S&P 500.” I did.
He told me, “Find the Great Depression. Find Black Monday. Find Black Tuesday. Find any of the darkest days in the market history. Point to me the 1973 oil crisis. You see, here’s the secret: They’re just blips.”
Of course, it seems obvious now. It seems undeniable when you look at the multi-decade returns of the index. But in that moment - when chaos swirled around us and it felt like the world was ending - I discovered what at the time appeared revolutionary.
Yes, there may be down days, down weeks, down months, and even down years. But ultimately, the market only moves in one direction: Up.
Most importantly, I realized if I remember that when everyone else doesn’t…when everyone else is overwhelmed by panic and indecision…that’s my advantage.
For more than two decades, that’s been my mantra and guiding philosophy. Don’t panic. It has made more of an impact on my life than anything else. It’s brought me calm in even the fiercest of storms. It guided me during the financial crisis.
Over the last 44 years, the S&P 500 has experienced pullbacks of at least 10% in 23 of them. That means these corrections occur more than half the time. Our last one was October 2023. But here’s the most important statistic to remember in all of this: In 13 of those 23 years when US equities have fallen at least 10%, the S&P went on to end the year higher an average of 17.5%.
The American beatnik poet Charles Bukowski famously wrote: “Wherever the crowd goes, run in the other direction. They’re always wrong.”
Bottom line? This is a gift many of us wait for each year to unfold. To go picking through the rubble for shares of great companies trading at momentarily, steeply discounted prices.
