• Research and data-driven behavioral insights to guide client conversations

  • Practical application of behavioral finance to portfolio construction, management and analysis

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  • Current market conditions from the Behavioral, Economic, Valuation, and Technical perspectives

Behavioral Advisor Perspectives and Practices: Drawdown, Turbulence and Recovery

Everyone breathed a sigh of relief as markets had several positive days. Don’t be surprised, however, if markets drop suddenly and test or breach previous lows several times over the next few weeks or months. Much like flying through a thunderstorm, there are likely to be some bumpy times ahead. No matter how many times you have flown, your heart jumps every time the aircraft drops. Fortunately, there is no need to time the bottom for long-term investors. 

The table below shows 11 markets with drawdowns of 30% or more in the last 90 years. While we don’t know how deep or long this downturn will be, the good news is that in every case markets have come back and often have made sizable gains following the downturn with an average 1 year return of 57% following the trough.

TOPS&P500DayImage

Source: Ben Carlson DFA/Bloomberg.

Markets are likely to go up and down dramatically over the next few weeks or months and will test your emotional fortitude. However, if you can stay invested, you are likely to do well towards meeting your long-term growth goals. So “Fasten Your Seat Belt” and “Stay In Your Seat” until you have reached your final destination.

 

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IMPORTANT INFORMATION AND DISCLOSURES

The information provided here is for general informational purposes only and should not be considered an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. It should not be assumed that recommendations of AthenaInvest made herein or in the future will be profitable or will equal the past performance records of any AthenaInvest investment strategy or product. There can be no assurance that future recommendations will achieve comparable results. The author’s opinions may change, without notice, in reaction to shifting economic, market, business, and other conditions. AthenaInvest disclaims any responsibility to update such views. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of AthenaInvest.

You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives and financial circumstances. You should consult with a qualified financial adviser, legal or tax professional regarding your specific situation. Investments involve risk and unless otherwise stated, are not guaranteed. Past Performance is no guarantee of future results.

 

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