What Does a 20% Gain Feel Like?

By: Matt Garrott
By: Matt Garrott

What do you remember most about the markets over the last 12 months or so? Was it the big drawdown in the first quarter?  Brexit?  Maybe the flash crash from a year ago?  How did you feel during each of these supposedly world-ending crises and how do you feel now that they are in the rear-view mirror?

In August of 2015, there was a flash crash where the Dow dropped over 1,000 points intra-day. The S&P 500 got off to the worst start of any calendar year when it plummeted over 10% to start 2016.  The Brexit vote rocked the financial planet at the end of June.  It is scary to be invested during disruptions like these.

Imagine if you had experienced a run-up in the market of 10% instead. Or maybe even 20%.  How do you think you would feel about that?  Would you feel good?  To answer that question, just reflect on how you feel about the markets right now.  The S&P 500 is up over 20% since February 12th.

This is not to say we should be dancing in the streets and buying Aston Martins. This is just a great time to contrast how a good market feels versus market downturns.  The bad times tend to loom large while good times are remembered as quiet or boring.  There is an old adage that the stock market takes the stairs up and the elevator down.  This has been true in 2016 as we’ve seen a couple of big drops, but more often than not, the market has slowly crept back up.  Be mindful of the market’s gains as the media’s attention flits from crisis to crisis.

Fairway Scorecard 8-31-2016