We recently passed the one year anniversary of COVID being recognized as a global pandemic. As it relates to the markets and investing, I thought it might be interesting to pause and reflect on what happened over the past year and what lessons we can learn going forward.
As we all experienced, the market dropped off precipitously... down 34% in just 33 days. Unbeknownst at the time, this marked the bottom in the market but certainly not the turning point in the crisis. Looking back, there are three takeaways that can help us going forward.
- Crazy things happen - Sometimes things happen we could never have imagined. Due to the pandemic and subsequent lockdown of the world, the price of oil actually went negative and airlines cut routes by up to 95% in just weeks.
- Mistakes are made. Costly errors are made when we act hastily. As dire as things may seem during a crisis, it pays to remain optimistic of the road ahead.
- Take a long-term view. The markets have endured many crises over time. Yet, the upward sloping historical trend line of mainstream equities persists and rewards the patient investor.
During difficult times, when markets are declining and/or future expectations are negative, it is helpful to consider the big picture. We will always face crises that may negatively affect the markets. The reason, timing, and depth of market declines are unknowable in advance. But, they have always been temporary in duration. This provides the long term, goal focused investor something of great value – Historical Perspective.