Year to date, the U.S. main index, the S&P 500 is down approximately 25%. Fortunately for those who hold these stocks in USD, at least the appreciation of the USD had provided some protection when looking at portfolios in our native CAD currency. Historically, the S&P 500 has fallen an average of 29% around recessions (median of 24%). It’s hard to determine if we are in a “recession” or not. Currently, stocks appear to be pricing in a mild recession but could overshoot given inflation concerns. Once stocks have found their low during a recession, the average one-year forward return is 40%.

 

But I found this chart useful (I’ve shared different iterations of this over the years, when the market is down).

 

 

I wish I had access to a crystal ball which could tell me when to sell, and when to get back in. However, it’s clear that riding out downturns, and allocating investments to different types of companies in different sectors is much better than deciding to simply sell everything, or just ride losers hoping they will come back. We are all invested in order to achieve gains over time. I'm still in shock from Thursday's massive stock market swings after the inflation report, which showed consumer prices rose 8.2% annually in September, ahead of expectations for an 8.1% increase. If we look at investing under this guise: in the morning, the market was down more than 2%, yet it closed up more than 2%... This makes it very difficult on a day-to-day basis to be making trades: imagine panicking and selling all in the morning? Instead on one day, I think this chart does a good job of advocating for not panicking over a longer period.

 

FUN FACT: You can impress your friends by telling them that the Thursday stock market move has only happened 3 other times in history: twice in 2008 when Lehman Brothers and Bear Stearns collapsed (while other banks got massive bail-outs), and in the early 1990s during the Gulf War…

 

So, I’m not sure if my FUN FACT will be a discussion over the dinner table on the weekend: I’m still licking my wounds after the Jays collapse over Thanksgiving. I guess onto hockey, where my beloved Edmonton Oilers are going to win the Cup this year (beating the Leafs in the final: how’s that for a prediction!)

 

Have a great weekend.