It’s often said that investing in the stock market is a bit like riding a roller coaster. Most of the time the ride is like Disney’s Thunder Mountain Railroad, but occasionally the ride is like Kingda Ka, the world’s tallest roller coaster with a 418-foot drop. The important thing when riding a roller coaster, and as an equity investor, is to stay in your seat.
Just three weeks ago the S&P 500 Index was at 2237, it starts today at 2846. That’s an increase of 27.5%, during the world’s most challenging public health crisis in the last century and facing difficult economic headwinds. For investors who panicked out of the market they now face a very difficult dilemma – when to get back in.
When things are darkest, it is hard to appreciate the resilience of capitalism. Just in the last few weeks we’ve seen distilleries produce hand sanitizer, industrial companies convert their production lines to produce respirators and ventilators, and drug companies mount a full-scale assault on finding therapeutics to combat COVID-19.
I don’t know what the market will do in the coming weeks and months. Our mantra to clients is the best asset allocation is one which you can stick with in all market conditions. The recent market swings are Exhibit A in the importance of being able to stay in one’s seat.