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Discipline Delivers Results

Steps to successNew record highs for stocks coupled with political uncertainty brings a fear to some that the market is headed for a crash. We say, uncertainty always exists, and those who are disciplined survive and thrive.

The Dow Jones Industrial Average has reached, and continues to reach record highs. For many, this may leave them feeling the dread of “Uh-oh, when’s the shoe going to drop?” This type of mentality leaves us, at Private Wealth, scratching our heads. Historically, the DJIA and all of its counterparts in indices have continued to grow. There have been times of turmoil, times of severe correction, but the market has persevered. Consequently, those who have stuck to their principles have prospered due to their discipline.

This time, it is positive a stock market move coupled with political uncertainty that causes a fear of what may be lurking around the corner. The uncertainty of the 45th president’s policies and trade decisions leave people feeling uncertain about what is to come.

It may feel as though we are in uncharted territory, but the reality of the situation is that uncertainty and change are the only constants we can rely on. This uncertainty is not unlike any other uncertainty. It is always there, looming in the background, trying to scare us into making a decision that won’t do us well in the long term.

The Resilience of Markets

Seeing the resilience of capitalism in free markets is reassuring and despite everything we don’t know, history suggests that we should maintain confidence that the markets will recover and will continue to reach record highs. The Dow is over 20,000 at the writing of this blog. Every day seems like a new market high. There is no certainty that it will be at that high tomorrow, but you can be certain that today’s high will be surpassed. There is always a possibility for a drop in the market. A prudent investor needs to know when they will need access to their money and adjusts their exposure to risk accordingly.

In 2008, the DJIA, one of the most closely watched U.S. benchmark indices, fell from a record 14,000 to below 7,000 by early 2009. It was the biggest drop in the market since the crash of 1929. In the eight years since, the DJIA has almost tripled from that historical low. The stock market has remained resilient even with the financial media “claque-ing” in the background about the next great crash every time there was a market correction, major news event, or political shift. For those who were able to tune it all out, their balanced and globally diversified portfolios have seen growth and stability.

DJIA 2007 - 2017


source: tradingeconomics.com

It is human nature to have aversion to anything that causes us distress or pain. Nowadays, not very many people remember the crash of 1929, but we still look back on it with such fear and historical significance because it caused a tremendous amount of uncertainty, hardship and struggle for an entire generation of people. From the chart below, it is incredible to note that the crash is barely visible in our historical timeline of the DJIA since inception. What this suggests is that, although there is nothing that should discount or diminish the hardships that people have endured due to the short term effects of market crashes, the markets will survive.

DJIA 1929 - Present


source: tradingeconomics.com

So what do we say about volatility in these completely ordinary times of uncertainty? Investing for the long term, prudently and without emotion, is in your best interest. Making choices based on fear or based on the unknown will not result in the best choices being made. We are a coach to our clients, fostering communication and utilizing research based on science, not speculation, so that whether the news is good or news bad, our clients’ money is invested responsibly. That is one thing we can be certain about.