Market Highs and Lows
What History Shows Us
After 30 plus years of managing assets, two of the most common questions, when the market sets a new high, are: When will we get a pullback? And when or if we get any kind of pullback, the next big question is how far will it be? While both questions are natural, if you allow fear of the future to control behavior then you may be disappointed by results.
What you can learn by reviewing historical markets is that new highs are sure to come as well as pullbacks. In fact, pullbacks are often considered a healthy part of the market, much like the exhale is to breathing. Trying to time pullbacks or attempting to premeasure the extent of one is close to impossible. This is why industry experts, including our team at Linden Thomas, believe that dividing your portfolio between long-term growth and income, and short-term cash is often the best way to settle the debate on whether the market will or will not hit a new high.
When it comes to investing, a logical approach and a long-term mindset are required to outsmart the short-term down markets.
Every Recession or Downturn Has Been Followed By A Rebound
There have been approximately 33 major recessions in the United States from 1854 up until 2018. Of all these recessions, 100% of them have seen a rebound to surpass former market highs. What does this mean? Recessions are a natural part of the economic cycle. There’s even an argument that they are healthy when looking at the big picture for the economy. So if each market downturn had a 100% probability of coming back, why guarantee a loss (or lower return) by panic-selling when statistics lean in the investors favor?
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