As investors cope with their seventh market correction of at least ten percent since the Great Recession back in 2008-2009, we thought it would be beneficial to pass on some items we find helpful in addressing the stress that accompanies such drops.

First and foremost, recognize that corrections (defined here as declines of 10% or more in the S&P 500) as well as bear markets (declines of 20% or more) are quite common and essential for the economy as well as financial markets in order for them to regain equilibrium. In fact over the past one hundred years corrections of at least ten percent have occurred every year or two while bear markets come along approximately every four years.

Similar to the flu, market pullbacks are quite painful, scary and always seem terminal at the time. However, after recovery, they are soon forgotten. For us, it is therefore comforting to know that every market correction has been subsequently followed by record highs. Over time, the health of the market will improve.

Remain in your lane. Assuming that coming into the correction, your investment portfolio was aligned according to your long-term objectives, there is no need to now make drastic changes to those percentages unless after the pullback, it has become unbalanced. Perhaps your intended weighting is 70% equities, 20% fixed income and 10% cash. As long as that remains the approximate current weighting, then little action may be needed. However, given the catalysts for the correction (inflation, Russia, COVID, China, Supply Chain, the Fed, etc…), the securities within those asset classes may need to be adjusted.

If you must, take some incremental steps in order to sleep better at night. We often state that the benefits of investing go to those that have the fortitude to look past the short-term volatility and remain focused on their long-term objectives. However, if readjust you must, make them relatively small in proportion to the size of your portfolio. For example, raise cash by five or ten percent rather than by fifty or fifty-five percent! Address your worries without capitulating entirely.

Recognize that your greatest fears will be addressed endlessly by the media, drawing you, like a siren, to focus solely on the negativity surrounding the current market environment which, in turn, may ultimately result in you making poor investment decisions. Hey, that’s their job – air the clickbait, drawing you to constantly watch or listen and perhaps ultimately causing you to “protect your portfolio,” quite often to your own detriment. Our advice, pull away from the information overload and watch some baseball (go Mets!), your favorite classic movie, get some exercise or dig in your garden. You’ll thank us for it.

May we quote Mike Tyson? “Everybody has a plan until they get punched in the mouth.” Knowing that they are a fact of life, anticipate corrections and make a plan ahead knowing that once you are punched in the mouth, your tendency will be to focus on the pain and react accordingly. Acting proactively, ahead of the correction will give you a fighting chance to ignore the short-term pain and enable you to focus on the long-term benefits of investing.

Touching on the point of the uncertain environment in which we are forced to invest – “there’s certainly a lot of uncertainty. However, the longer that the uncertainty persists, at a certain level the more comfortable investors will be willing to invest amidst the uncertainty.” (Say that five times fast.)

There’s no garden without rain. Everybody wants to sun to shine daily. However, without rain (corrections) there would be no sun (opportunity). One does not occur without the other.

Finally, from Berkshire Hathaway CEO Warren Buffett, “the stock market is a device for transferring money from the impatient to the patient.” Be patient. This too shall pass.

Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, Please call 518-279-1044.

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Given the recent volatility in the financial markets, we thought it timely to add some perspective to the pullback investors are experiencing in both stocks and bonds. That said, we certainly recognize that these are stressful times and suggest perhaps repositioning your portfolio to make certain you are well positioned when we emerge from this malaise.

On average, stocks drop more than ten percent every other year and experience a drop of more than twenty percent every three to four years. Having been in this business for a combined half century, we realize that none are easy and know that every pullback feels like it is “different this time.”

Since the market bottomed toward the end of the Great Recession around February 28, 2009, excluding dividends, the S&P 500 has risen at an average of 13.56% per year while nonetheless experiencing six pullbacks of at least ten percent. These include one that began April 23, 2010 during which the S&P 500 dropped 15.99%; one that began on April 29, 2011 during which the S&P 500 fell 19.39%; November 3, 2015 where there was a decline of 13.31%; January 26, 2018 began a correction of 10.13%; September 20, 2018 during which the S&P 500 fell 19.78% and the COVID induced bear market that began on January 19, 2020 and ended 23 trading days later on March 23, 2020 during which the S&P 500 fell 33.92. There it is six corrections over the past thirteen years or once every 2¼ years or so. We may be wrong, but it does look like we were due for a correction.

Don’t forget that EVERY correction or bear market in the history of the United States has been followed by subsequent new record highs. Let us repeat, EVERY correction or bear market in the history of the United States has been followed by subsequent new record highs. You may say it is different this time. Historically, that would be unprecedented.

What leads the market down during corrective phases will not necessarily lead the ensuing recovery.

Both stocks and bonds have corrected (dropped more than ten percent) which is a deviation from recent history. This is the result of the recent rise in interest rates. It is often said that the cure for high interest rates is higher interest rates. It will not be different this time.

Inflation will remain high. However, the rate of month/month change is peaking.

Becoming a successful investor requires one to recognize that there will be losses in your portfolio and regrets. That is a fact of life. Investors must fight the tendency to sell into weakness. Think long-term. Historically, as noted above, the stock market has a 100% chance to eventually make new highs.

The stock market is a discounting mechanism. For example, the market bottomed on March 23, 2020 just as the economic impact of the COVID pandemic was spreading across the world. By the time you feel “comfortable” buying, the market will have already begun to rebound. Historically, it pays to be uncomfortable.

Despite the above, expect more volatility throughout the remainder of the spring and most likely well into summer. In addition, unlike prior corrections, we expect that the recovery will be more in the shape of a “U” rather than a V.” However, we also believe that patient investors will be well rewarded within the next twelve months.

Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, Please call 518-279-1044.

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Given the recent volatility in the financial markets, we thought it timely to add some perspective to the pullback investors are experiencing in both stocks and bonds. That said, we certainly recognize that these are stressful times and are doing our best to make certain that our clients are well positioned when we emerge from this malaise.

· On average, stocks drop more than ten percent every other year and experience a drop of more than twenty percent every three to four years. Having been in this business for a combined half century, we realize that none are easy and know that every pullback feels like it is “different this time.”

· Since the market bottomed toward the end of the Great Recession around February 28, 2009, excluding dividends, the S&P 500 has risen at an average of 13.56% per year while nonetheless experiencing six pullbacks of at least ten percent:

o April 23, 2010 -16.0%

o April 29, 2011 -19.4%

o November 3, 2015 -13.3%

o January 26, 2018 -10.2%

o September 20, 2018 -19.8%

o January 19, 2020 -33.9%

· Every correction / bear market in the history of the United States has been followed by subsequent new record highs.

· What leads you down doesn’t necessarily lead the ensuing recovery.

· Your portfolio is designed for all types of markets, including this one. That said, if you feel it necessary to raise additional protection to what we have already done, work incrementally.

· Both stocks and bonds have corrected (dropped more than ten percent) which is a deviation from recent history. This is the result of the recent rise in interest rates. It is often said that the cure for high interest rates is higher interest rates. It will not be different this time.

· Inflation will remain high. However, the rate of change is peaking.

· Becoming a successful investor requires one to recognize the following

o There will be losses. That is a fact of life.

o You must fight the tendency to sell into weakness.

o Follow your North Star. Think long-term. Historically, as noted above, the stock market has a 100% chance to eventually make new highs.

o The stock market is a discounting mechanism. For example, the market bottomed on March 23, 2020 just as the economic impact of the COVID pandemic was spreading across the world. By the time you feel “comfortable” buying, the market will have already begun to rebound. Historically, it pays to be uncomfortable.

Despite the above, expect more volatility throughout the remainder of the spring and most likely well into summer. In addition, unlike prior corrections, we expect that the recovery will be more in the shape of a “U” rather than a V.” However, we also believe that patient investors will be well rewarded within the next twelve months.

Should you have any questions, need clarification, or like to speak, please feel free to contact us at 518-279-1044 or on the web at www.faganassociates.com.

Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, Please call 518-279-1044.

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