As of October 2022, stocks were down 25% from their previous high. Bonds were down 15% over the same period. A “balanced” 60/40 portfolio was down 21%. It was, by some measure, the worst investing year in a lifetime.
January ’22 to October ’22: Stocks in purple, bonds in orange, and a 60/40 portfolio in blue.
But life goes on. What’s happened since October?
The economic news has been grim. Tech layoffs. Rising interest rates. National debt ceilings. Recession?!
Quietly, in spite of the grim economic news, the stock market has risen 16% over those 4 months. The bond market is up 6%. Roughly half the peak-to-trough losses have been recovered.
October ’22 to February ’23: Stocks in purple, bonds in orange, and a 60/40 portfolio in blue.
Zooming in more recently, the 60/40 portfolio’s performance in January ’23 was better than 96% of months over the past 100 years. 96% equals 1 per 25 –> once per 25 months means January was, on average, a once-every-two-years kind of month.
Was the financial or economic news media reflective of that outstanding performance? No.
Were the good financial vibes of January in family with the bad financial vibes from 2022? Not even close.
Do I have my head in the sand? Am I taking crazy pills? I don’t think so
Instead, the past four months are a terrific reminder that most of the time, your investment portfolio progresses upward, and does so quietly. The economy is not the market. The news is not the market. If you allow headlines to inform your investment decisions, you’ll quietly lose out on double-digit gains.
The bad news is loud. Irrationally euphoric news (see: Bitcoin, GameStop, etc.) is loud, too. But the boring, milquetoast, “hey we recovered half our losses” news stays quiet. That’s why long-term investing is hard.
We’re bombarded with horror stories and opulent stories, but not enough boring stories. I get it. The media’s business model is to capture attention and sell ad space. I’m not a “the media is evil” guy – but you can’t argue the facts: they sell ads. Boring doesn’t capture our attention – and sell ads – the way horror and opulence do.
It’s up to us, then, to recognize the positive-but-boring stories when they occur. And to celebrate them!
In my heart-of-hearts, I don’t think we should weep or celebrate such short-term returns. But that’s easier written than done. We’re only human.
I’m not predicting we’re out of the bear market woods completely. I have no idea. I don’t predict economic and financial market futures here. You can find such predictions over at The Worst Interest.
But lest our recent good news is quietly ignored, let me pronounce: January was a great month, the past 4 months were great months, and investors – especially older folks no longer adding to their portfolios – should rejoice in the streets. Their 60/40 investment shares are worth 12% more than in October, and 6% more today than a month ago.
Again, the best course is to be unaffected by both the gains and the losses. But if you lamented 2022, you better be crackin’ champagne now.
For all I know, tomorrow will kick off a terrible week that erases all these recent gains. I’m positive you’d hear about it in the news.
But the odds are in our favor. Life goes on. On average – and quietly – our portfolios progress upwards.
Thank you for reading! If you enjoyed this article, join 6000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.
-Jesse
Want to learn more about The Best Interest’s back story? Read here.
If you prefer to listen, check out The Best Interest Podcast.
As of October 2022, stocks were down 25% from their previous high. Bonds were down 15% over the same period. A “balanced” 60/40 portfolio was down 21%. It was, by some measure, the worst investing year in a lifetime.
January ’22 to October ’22: Stocks in purple, bonds in orange, and a 60/40 portfolio in blue.
But life goes on. What’s happened since October?
The economic news has been grim. Tech layoffs. Rising interest rates. National debt ceilings. Recession?!
Quietly, in spite of the grim economic news, the stock market has risen 16% over those 4 months. The bond market is up 6%. Roughly half the peak-to-trough losses have been recovered.
October ’22 to February ’23: Stocks in purple, bonds in orange, and a 60/40 portfolio in blue.
Zooming in more recently, the 60/40 portfolio’s performance in January ’23 was better than 96% of months over the past 100 years. 96% equals 1 per 25 –> once per 25 months means January was, on average, a once-every-two-years kind of month.
Was the financial or economic news media reflective of that outstanding performance? No.
Were the good financial vibes of January in family with the bad financial vibes from 2022? Not even close.
Do I have my head in the sand? Am I taking crazy pills? I don’t think so
Instead, the past four months are a terrific reminder that most of the time, your investment portfolio progresses upward, and does so quietly. The economy is not the market. The news is not the market. If you allow headlines to inform your investment decisions, you’ll quietly lose out on double-digit gains.
The bad news is loud. Irrationally euphoric news (see: Bitcoin, GameStop, etc.) is loud, too. But the boring, milquetoast, “hey we recovered half our losses” news stays quiet. That’s why long-term investing is hard.
We’re bombarded with horror stories and opulent stories, but not enough boring stories. I get it. The media’s business model is to capture attention and sell ad space. I’m not a “the media is evil” guy – but you can’t argue the facts: they sell ads. Boring doesn’t capture our attention – and sell ads – the way horror and opulence do.
It’s up to us, then, to recognize the positive-but-boring stories when they occur. And to celebrate them!
In my heart-of-hearts, I don’t think we should weep or celebrate such short-term returns. But that’s easier written than done. We’re only human.
I’m not predicting we’re out of the bear market woods completely. I have no idea. I don’t predict economic and financial market futures here. You can find such predictions over at The Worst Interest.
But lest our recent good news is quietly ignored, let me pronounce: January was a great month, the past 4 months were great months, and investors – especially older folks no longer adding to their portfolios – should rejoice in the streets. Their 60/40 investment shares are worth 12% more than in October, and 6% more today than a month ago.
Again, the best course is to be unaffected by both the gains and the losses. But if you lamented 2022, you better be crackin’ champagne now.
For all I know, tomorrow will kick off a terrible week that erases all these recent gains. I’m positive you’d hear about it in the news.
But the odds are in our favor. Life goes on. On average – and quietly – our portfolios progress upwards.
Thank you for reading! If you enjoyed this article, join 6000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.
-Jesse
Want to learn more about The Best Interest’s back story? Read here.
If you prefer to listen, check out The Best Interest Podcast.
Originally posted in The Best Interest