Are We Experiencing a Market Correction?
The S&P 500 entered a correction on February 22rd, 2022. This means it has declined 10% from its all-time high. You may have heard, seen or read about it in your choice of news media. But a correction is not news, not really; it is commonplace. Equity markets decline more than 14% on average each and every year, temporarily. Equity markets then go on to increase by 10% or more, on average, for the year.
What we are experiencing is an every-day, run-of-the-mill, intra-year temporary decline.
If you are fortunate enough to be in the accumulation phase of your life, then you may want to consider adding to your equity position. If your investments provide you an income, then I hope you recall conversations with your financial planner here at A&I Financial Services. They will have discussed with you the importance of cash reserves. I am not saying you need to use your cash reserves, but that this money is here to provide you comfort. In most cases, these dollars amount to two years or more of your expenses. They are tucked away, likely in your savings account, and are easy to access.
In either case, whether you would like to consider adding more to your equities, or whether you are making withdrawals from your investments, you may want to talk about it. This is your financial planner’s raisin d’etre—they would love the opportunity! You can review your real-life, long-term financial plans. You can decide what, if any, changes are warranted with today’s market movements. On the other hand, you may know already what they will say. In any event, you can trust that your financial planner here will serve as a listener, guide, and sounding board.
Equity markets decline, on average, nearly 15% every year. Every five years, they decline 30% or more. We rode through a thirty percent decline less than two years ago, in 2020, with the onset of Covid. We do not know if this decline will reach these levels. The good news is, neither does anyone else. To be an equity investor, we must find a way to be comfortable with these truths. The essential challenge to long-term successful investing is less about intellectual and financial fortitude, and more about temperament: it is about how we react, or choose not to react, to market declines.