On March 23rd, 2020, the Dow Jones Industrial average reached its lowest position since November of 2016. From that point until the date of this writing, the index is up 58% and is sitting at its all-time high. Technically, this year will go in the books as a recession for the markets, but as I heard another advisor put it, we got a ‘freebie’ in terms of market corrections.
We are used to market corrections being slower and longer that the one we had in 2020. The average correction lasts 22 months while this year’s correction only lasted one month. Back in March it felt like the 30% drop happened overnight. We had single trading days where the Dow Jones Average dropped 7.79%, 9.99% and 12.93%, with the latter being the second largest daily drop in history, only behind “Black Monday” in 1987.
Think back to 2008 or 2000. What did you hear all day, every day, for months and months on end? Negative stock market and economic news! The more of this we hear and the longer we hear it, the harder it is to resist the urge to react and make investing decisions based on what we are being bombarded with every day. This year, though we had the bad news, it didn’t last nearly as long. The market drop happened so quickly it was like ripping off a band-aid rather than the slow, painful bleed that we are accustomed to.
Undoubtedly, many of us will see another long, slow, stock market correction in our investing lifetimes. When you do, remember how you reacted with the ‘freebie’ correction in 2020. You didn’t panic and sell, you didn’t dwell on the negative headlines day after day, and you didn’t try to make investing decisions outside of your time-tested, intentional strategy. You stayed patient, looked for opportunities, and were focused on the positive, lasting things in your life. Remember those impactful lessons when you face the next market correction, because the next time around might take more discipline than 2020’s ‘freebie’!