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Markets in 2024
Ain't Nothin' Gonna Break My Stride
It seldom pays to shy away from stocks altogether. The odds are against pessimists. Markets over the last 96 years through 2023 rose 70% of the time over one year periods.(6)
A singer named Matthew Wilder sang a hit song Break My Stride back in 1983, and at the time the song hit the top five on the Billboard Hot 100 charts. A song about relentlessness. Ain't nothin' gonna slow me down in the lyrics could just as easily been referencing post-COVID markets in the 2020's.
That's the case certainly in 2024, which is one of the few years in market history that hasn't yet experienced a bona fide correction (10% or more decline).(1) On the surface, the absence of market pullbacks might seem ideal. But markets without correction or pullback for a period of time have consequence. They sow seeds of speculation.
It's the Very Reason Markets Produce Higher Returns
Without corrections, investors forget or minimize the lessons of history. Corrections are hot stove lessons that confirm what markets naturally do. Without these reminders, animal spirits rise and investors more often than not migrate away from rationality and their ideal risk lane within their investment journey.
We would say that it is in this year animal spirits have risen. Lessons of 2022 fading away.
Recovery Time
After the COVID investment windfall years of 2020-2021, we wrote the following in January 2022: "We suspect that 2022 will be a much different year than the prior two. Remember that the easy gains have been made. These have not only been good years but near utopia. Investors will have to re-learn the concept of corrections and pullbacks."
As 2022 progressed, the S&P 500 subsequently hit a low point decline of 27%.
It wasn't until the first quarter of this year that the S&P 500 breached the year-end 2021 high water mark once again as markets recovered from the bear market of 2022(1). It took some of 2021, all of 2022 and a short visit into 2024 for the S&P 500 to breakeven once again.
Forge Ahead
A total migration out of markets, as history reminds us, has been a mistake. The odds are in one's favor. But it is important to note that valuations make a difference to long-term returns. Raising or lowering portfolio cash levels and adjusting investment allocations along the way is not the result of pessimism, but a realization that markets sometimes move away from rationally priced levels. And savvy investors take advantage of these mis-pricings to enhance long-term outcomes.
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