Sedona Arizona

Will it ever normalize?

These are the words that keeps crossing my mind. “Will this market ever normalize?” We are now a good 11 months into this market downtrend.

Actually, if we’re being picky, the tech market peaked in February 2021 and has been a source of downward volatility ever sense.

Actually, if we’re being super picky, the tech market started the major recovery coming out of March 2020. Upward volatility.

A couple days ago I watched the 3-part Netflix documentary “Eat the Rich”, which is the story of the GameStop trade. Remember that nonsense that happened almost two year ago?

I remember that time well, and at the time I sent a lengthy email to clients explaining what was going on and why we weren’t playing that game. I also remember feeling like we needed to get through that period for things to normalize. Do you remember all that was happening in early 2021?

We just need to get through this period…

In March of 2020, I remember feeling like we needed to get through that period for things to normalize.

In September 2018 when the Fed was raising rates, I remember feeling like we needed to get through that period for things to normalize. Fed Chairman Powell said he wasn’t sure when the committee would stop raising. The market hated that uncertainty. Sound familiar?

Then, there was that period in November 2016 through January 2017 when the market priced in the election going a different way. I remember feeling like we needed to get through that period for things to normalize.

Back in January 2016, oil traded below $27 per barrel and sent the market on a tumble. I remember feeling like we needed to get through that period for things to normalize.

Or, in August of 2015 when China devalued the Yuan. The Dow fell 1,000 pts for the first time ever. I remember feeling like we needed to get through that period for things to normalize.

Shall I keep going?

When things normalize…

Going all the way back to 1926, there are plenty of times the world was ending and the markets would never recover. Here’s a chart of the growth of $1 invested in the S&P 500 since 1926. What’s more important about this chart are some of the events that have impacted markets over time:


In a recent conversation with a client, I made the case for how things could normalize this time. If we get a sustained break in inflation, the Fed could slow the pace of interest rate hikes. If they do that, stocks are likely to move higher and shorter-term bond yields may come down. Then, we get through the mid-terms and uncertainty around policy could abate.

Again, we need to get through this period for things to normalize.

And then it hit me.

What is normal?

Normalize? What the heck does that even mean? Looking at the chart above, I’m not sure how one could define a “normal” period. Maybe chaos and uncertainty are the [air quote] norm? If so, why is adjusting to market volatility so mentally and emotionally difficult?

One reason I believe this happens is because we are hardwired to find danger and protect ourselves from it when we do. Fight or flight. Because the forces that drive market activity are beyond our control, our options are: fight ourselves to stay invested when fearful, or, sell and wait for better conditions.

There are always reasons to be fearful. There are always reasons to sell. But, do we really believe better conditions will ever come? Now we’re crossing into confirmation bias, which can lead to poor decision-making and quick, irrational action.

Rather than sugar coating the end of this post with the “stay invested, take a deep breath, turn off the news” kind of language, instead I will simply say “me too.” It’s been a long year, and sustained volatility is challenging for all of us.

Are you going to be okay financially?

These periods can grind on your psyche and sense of optimism. The more objective you are able tor remain, the more likely you are to see opportunities in times like these.

With the sustained volatility in the market, you may be wondering if you’re still going to be okay financially. Click below and answer a couple of questions about yourself and your future objectives to see how close you are to hitting your goals.


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Author: Dale Shafer II, CFP®, APMA®, CDFA®

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