While it is worth the time and energy to establish an efficient portfolio, financial markets don’t provide straight line returns and often the largest factor to a successful outcome is discipline.
Taking a step back periodically and looking at things with a long-term perspective makes staying disciplined easier.
While it may be natural to draw predictive conclusions by looking for patterns in the charts shared in this piece I’d caution this sort of thinking as the market rarely repeats itself.
The following graph puts the 2018 equity market results and downside into a longer term context.
The following graph is an interesting analysis of prior recessions and related declines the stock market.
The media tends to sensationalize the point change for an index. This isn’t useful to investors. This graph puts the S&P into a logarithmic scale. This allows for better perspective relative to time frame and magnitude.
The following is a rolling period analysis which may be useful in assessing what the proper time horizon is for an investment. While past results aren’t indicative for future returns this does provide a basis for the proper investment time horizon for the equity portion of a portfolio.
This graph shows the impact the Federal Reserve Bank has had on short-term interest rates since it started its tightening cycle. This graph illustrates the importance to understand the Fed’s limited impact on the intermediate and longer maturities as those rates in some cases have fallen over some prior periods.
US Treasury Yield Curve
The key to success is creating a customized and efficient investment plan that each investor can stick with and implement it in an unwavering disciplined way. The goal of sharing this information is to provide a framework for discussion to help investors look past the short-term volatility and noise that global financial markets inherently contain.
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