Recession Ahead?

Now that we are 2 years removed from the initial COVID-induced market downturn, I thought it would be insightful look at how a hypothetical portfolio would have performed, if my advice had been taken in April 2020. How would you diamond hands traders have fared versus those fidgety paper hands investors? Let’s take it from the top, shall we?

Using a starting point of January 1, 2020, B.C. (Before Covid), the market hit a bottom on March 23, 2020. $100,000 invested at the beginning of the year would have fallen 30.75% to $68,677. A loss of ~$31k.

If you had remained in the market, your patience would have paid off as the market staged one of its quickest and most forceful recoveries ever. From the former low on March 23 2020 until December 2020, the S&P shot up 62% and that original $100,000 was worth $115k.

What about after 2020? After all, that was 2 years ago. Well, if an investor kept their money in the market through 2020 until the end of 2021, portfolio would be worth $146k.

Imagine the regret in hindsight of panicking and pulling out of the market during the low of 2020 for a $31k loss versus staying calm and posting a $41k gain.

Lastly, the elephant in the room. 2022 has been a dismal year for the stock market. Stubbornly high inflation, rising-interest rates, and a cooling-off in markets that experienced parabolic growth over the last 2 years have created a perfect storm for plummeting stocks. Year-to-date 2022 the S&P is down 18% while the NASDAQ is down 27%.

Even still, our portfolio is far better off if we do nothing and hold rather than sell. As of the time of writing (June 10, 2022) that initial $100k from Jan 2020 would be worth $120k.

Stay Calm. Keep Investing.