There will always be aspects of our lives that we do not enjoy. Sometimes it will be a situation at work that causes stress, other times it will be our friends that disappoint us or our family members who make us angry. But in moments like these we take a few steps back to have a broader view.
If we look at the equity market in the USA, we see the S&P 500 index at an all-time high. This makes the current US bull market the longest in recorded history, coming in at 3 453 days and counting. Borrowing some points made in a recent Vestact newsletter, the S&P 500 bottomed out at 666 points on 6 March 2009. Currently it stands at 2 863, which means it has more than quadrupled in less than 10 years.
But looking back, we can see that there were many moments of doubt. We started off with a fear of the ‘double-dip’ recession. Then there were a few Greek crises along the way. Remember how Ebola hit the markets? And the fiscal cliff fears, where the US federal government shuts down temporarily owing to their debt ceiling. Then the concern that China was not growing fast enough to carry the rest of the world; this resulted in a close to 20% drop in stock prices.
The two biggest fears though, were when the Fed stopped their quantitative easing (QE) programme and then when the Fed increased interest rates for the first time.
At any one of these scary moments, you had a choice between staying in the market or selling out. If you sold out and went to cash, you are probably still in cash and earning nothing.
There are, however, situations where you should make the call and get out of a situation, like being invested in Zimbabwe some years ago, or Venezuela currently. The thing is we never really know. The only solution to this problem is to take emotions out of the equation, listen to a broad range of opinions and never have too many eggs in one basket.