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Sound Advice: May 18, ,2022

The Pendulum Swings Both Ways 

For many measures, the average or normal values are rarely the most common.  For the stock market, prices tend to spend more time closer to the extreme ends of the traditional spectrum.  What comes along with this tendency is the expectation that the current path is the one that’s most likely to be followed.

Not only is there an expectation of more of the same, but optimism grows as prices climb and pessimism increases as prices drop, which from an investment standpoint is counterproductive.  Lower prices mean you’re getting more for your money.  And vice-versa.  Yet, investors are increasingly spooked by the latest reversal in stock prices.


We’ve been through this before and we’ll go through it again.  The pullback that’s been under way since the beginning of the year reflects the long-term process of digesting ongoing economic and geopolitical developments.

It’s all part of a much broader picture.  Recent pullbacks such as those of early 2020 and late 2018 came and went.  So did the brutal plunge of 2008-2009 in which the leading indexes dropped in half.

When the going gets rough, it’s essential to remember that downturns are always followed by recoveries to even higher levels. 

N. Russell Wayne, CFP®

Any questions?  Please contact me at nrwayne@soundasset.com

 

Any questions?  Please contact me at nrwayne@soundasset.com

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