I’ve been thinking a lot about the current state of the markets. I feel bad for the folks who are freaking out, although I can see where they’re coming from. Most of the folks in my circles tend to skew younger and they’ve had the fortune of incredible stock market performance:
We’ve had a couple hiccups, but healthy markets are almost all the younger set has ever known:
And then the market starts to not be so happy and everyone gets a bad case of recency bias:
Recency bias is a cognitive bias where people tend to place disproportionate weight on recent experiences or information when making judgments or predictions, often overlooking or downplaying older, more relevant data.
The more relevant data is the performance of the markets over the long-term, not the past 15 years. But humans aren’t wired to think like that, so everyone freaks out.
Where Do We Go Now?
Do you want the good news or the bad news first? Bad news? OK.
It may get a lot worse. There is a lot of truth to this:
If the tariffs stick:
- It’s earnings season and we’re about to hear a bunch of scary forward-looking statements.
- And in future quarters, we’ll see earnings take a hit.
While the cause of this particular downturn is unconventional, corrections are normal and expected. Charlie Munger once said:
If you can’t stomach 50% declines in your investments, you will get the mediocre returns you deserve.
This brings me to my last quote, supposedly from Mike Tyson:
Everyone has a plan until they get punched in the face.
I like this quote, but I also think your money plan should be strong enough that you don’t go off the rails even when Mr. Market punches your portfolio in the face.
And right now isn’t the time to be making your plan. Just as you don’t buy insurance when the hurricane is 30 minutes away, you don’t consider how you’ll react to a downturn in the middle of a downturn. Do your planning when the skies are blue.
What is the good news then? While scary now, it’s all noise to the long-term investor. Perhaps these tariffs will be rescinded soon* if other countries relent. It not, we’ll be in for some pain, but it’s all self-correcting. If these policies don’t work out, someone else with different ideas will be voted in and we’ll move on.
And if you’ve done well, please ponder that for a moment. Many of us FI-folks are in a pretty great situation and we tend to forget about as soon as the market farts. I’ll leave you with Lee’s comment on this post:
Stay sane y’all!
More 1500 Days!!!
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I’m super fortunate, I’ve always been really good at getting punched in the face. It’s not like I’m going to win any beauty contests anyways, so free rhinoplasty is always welcome.
It either hurts or you get knocked out. If it hurts, you stay in the fight. Get knocked out? Get back up, shake it off, and get back in the fight. You’ll never escape yourself if you run away.
Maybe there’s a metaphor there.
Love it.
And failure doesn’t have to be bad if you learn something from it and apply the knowledge down the road. I stopped investing when the Great Recession happened and put my head in the sand. It was a silly mistake, but I’m sure as hell not going to make it again.
I am sane enough to realize this a risk I signed up for. . It helps during accumulation please as well. Compared my NW to 2020 to 2025, I am nothing but blessed. I ignored the confidence money gives. It was right in front of me that how brave and confident I have become over last few years.
Note: writing this after end of 4/9 when market bounced back almost 10%. Little frustrated as paycheck hits tomorrow and I am getting a 10% discount when it was advertised 20% all over .
I lived through 2008 and watched my portfolio drop 50% in 6 months. Not only that, but it dropped t below what I had contributed. I was mid-career and still working and didn’t touch it. Everything returned within a a couple of years and kept going. That was MY learning experience. The first time I rebalanced was this past Feburary and it had nothing to do with politics. VTI and one tech stock became 90% of my portfolio and my target was 70%. Merely got lucky on timing of rebalance.
Ha! Thanks for featuring my comment!
Anything less than a 50% crash, and this could happen in 2025, is just a pothole. You have to have margin built into your plan. If you do then you can actually smile when the market falls by 5% several days in a row. At 69 I’ve seen more corrections and crashes than I can remember. Only the very first one bothered me. After that it became obvious it was a normal market feature, and it let me buy more shares at a discount.
This post is a refreshing reminder that long-term perspective is everything. It’s so easy to get caught up in short-term volatility and lose sight of how resilient the markets are over time. I love the Tyson quote—perfect metaphor for investing through rough patches. Also agree that planning should happen in calm weather, not during the storm. Your level-headed approach is much needed right now, especially for those who’ve never experienced a real downturn. Appreciate the clarity and optimism—plus the Munger quote never fails to hit home. Thanks for sharing your thoughts and helping others stay grounded!
Being an elder millennial, I experienced the 2008 housing crisis, came out of college in one of the worst job markets ever, and have been told that the world is on fire every day since (occupy/covid/war/disease/etc…).
But I just keep investing. Gotta zoom out 5/10/15/20+ years and play the long game has always been my motto.
A quote from Game of Thrones… “The storms come and go, the waves crash overhead, the big fish eat the little fish, and I keep on paddling. (Varys)”
That’s a great quote from a great character.
And yeah, it’s easy to get sucked into a doom cycle of negativity. But this too shall pass and we’ll all move on.