The story goes that a wise sage once said: “May you live in interesting times.”
My reply is: “Nope, give me the old, the dull, the boring.”
However, “interesting” to one person is “boring” to another. It depends upon your perspective.
Let’s take a look at the latest episode of market volatility which may at the outset appear to be “interesting.” Now expand the time frame over five, ten and twenty-five years, and the current events may now seem “boring” … or at least, not all that unusual.
The S&P 500 reached 6,979 on January 27, 2026. Then new global conflicts, oil price surges, and new tariff threats, contributed to the S&P 500’s drop to 6,343 by March 3rd. On Friday, May 1st, the index closed at 7,230. It was down almost 10%, then up 14% from the low point and up about 3.6% from the January 27th high point.
But percentages are not “real numbers” to many people. Allow me to make this “real” by using dollars. Let’s assume that on January 27th of this year, your account was worth $1,000,000 “on paper.” If you looked at your account on March 30th after seeing your news feed about the “market crash,” the value was of the account was $908,869. Your response could have been “Holy C___, I “lost” one hundred grand (on paper)!?!?” But now, at the close on Friday, May 1st, the account value is $1,139.839. Now you feel ok and can actually enjoy the weekend.
But what if you were on vacation with no internet or news and saw the value of $1M in late January and then the $1.14M in May?
Remember, your account didn’t do this exactly. This only happens if you invest solely in S&P 500 which is an index, and you cannot invest directly in the index.
Now allow me to expand the time frame and the reference point. In May 2000, the S&P was at 1,420 and by the end of Sept. 2000, the index had dropped to 815. This means a $1M account in May decreased to $573,000 by the end of September (remember 9/11). Fast forward to 2007, the index was back up to 1,549. Thank goodness the craziness is behind us, but not so fast. The following year in 2008 the Financial Crisis begins and the S&P 500 hit its bottom in March 2009 at 735. By the end of 2009, the index is back at 1,115. The markets roll along for a handful of years and in January of 2020 (pre-COVID) the index reaches 3,225. Then COVID hits and the index drops to 2,584 in sixty days but bounces back up to 3,756 by the end of the year. If we go back to our hypothetical account valued at $1M in January 2020, it would have dropped to $810,000 by the end of April 2020 only to finish the year at $1,164,000.
Markets ebb and flow based upon a mixture of real (economic) events and psychological (ideas in our heads) factors. Bottom line, as Charlie Munger has been credited with saying: “Markets are an efficient way of transferring wealth from the impatient to the patient.” From May 2000 to May 2026, a $1M portfolio matching the S&P 500 index experienced many ups and downs (including two dramatic losses of almost 50%), grew to a $5M portfolio today.
Some people are either excited or traumatized by market volatility. For others, not so much. They have seen it happen before and expect to live through it again all the while not allowing the volatility to affect their daily happiness and well-being.
Let’s bring this back home: Should I do something now? What if the market crashes again?
Historically, the stock market often continues to rise after reaching a new all-time high. Because markets trend upward over the long term as economic and corporate earnings grow, new peaks are often followed by further gains rather than immediate crashes.
1. History Favors Continued Growth ---so stay invested. Data from the S&P 500 shows that all-time highs are not usually signs of an impending crash.
- One year later: Historically, the market is higher 80% to 81% of the time in the 12 months after setting a new record high.
- Long-term performance: The average return in the 12 month period following an all-time high (roughly 12%) is essentially identical to the market's return during any other random 12-month period.
- Don’t forget: Markets experience an intra-year decline of 10% or greater almost every year. When we look at historical annual returns, the markets have good years (positive returns) in four out of five years and bad years (negative returns) in one out of five years. This means that you should not be surprised to see your account values go down at some point during the year, but historically you will lose money “on paper” in one of every five years but make money in four of five years.
2. Record Highs Come in Clusters --- An "all-time high" sounds intimidating, but it is a normal occurrence in a healthy, bull market. Rather than reversing, markets often set new record highs in consecutive fashion because the underlying economic and corporate environments are supportive of growth.
3. Corrections are Rare in the Short-Term --- When they happen, invest more money. Many investors fear that a market peak will immediately lead to a crash or a "correction" (a drop of 10% or more). However, history shows that such corrections occur less than 10% of the time in the year following a new “all-time high.”
4. Our suggestion on what to do NOW --- The market spends a significant amount of its time breaking records. Pulling money out of the market because of the fear that the market may/will crash following a peak historically results in missed long-term gains.
- Stay invested: Getting out of the market now to "wait for a dip" often means buying back in at higher prices later.
- Dollar-cost average: If you have new/additional cash to invest, consistently investing set amounts over time (rather than putting a large lump sum in all at once) can help smooth out the impact of market volatility. Consider a continuous investment plan to invest more money.
- Focus on your plan: Let your personal financial goals and time horizon dictate your moves, rather than reacting to headlines about "record highs". Plan you cash needs well in advance. Try not to allow yourself to be backed into a corner and be forced to sell because you need money now. Plan ahead for those cash needs.
Call us if you have questions or arrange for a Zoom call or come to the office.
Wollman Wealth Designs, Inc is a financial services and investment firm in Escondido, CA partnering with families, friends and clients in San Diego County and around the country. Please visit our website, call the office or send us an email with your comments or questions.
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The views stated in this letter are not necessarily the opinion of Cetera Wealth Services, LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. For a comprehensive review of your personal situation, always consult your legal advisor. Neither Cetera Wealth Services, LLC, nor any of its representatives may give legal advice.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. Past Performance does not guarantee future results.
An investment in the fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve your $1.00 per share, it is possible to lose money in the fund.
Bank certificate of deposits are insured by an agency of the Federal government and offer a fixed rate of return whereas both the principal and yield of investment securities will fluctuate with changes in market conditions.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. Past Performance does not guarantee future results. A diversified portfolio does not assure a profit or protect against loss in a declining market.
S&P 500 – A capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.