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Keeping Your Eye on the Prize

Investment Commentary

Brent Ciliano, CFA | SVP, Chief Investment Officer March 30, 2016

"Keeping Your Eye on the Prize"

It’s now three months into the start of a new year and we’ve already witnessed more volatility than what most of us would have expected to witness over the course of an entire year, or even longer. We’ve had significant changes in market direction and sentiment, market declines and rallies, oil prices moving 5% up or down in a day, talks of recession, depression, economic meltdown, central bank failure, negative yields, negative interest rate policy, deflation, stagflation, hydrogen bomb testing, and political gaffing left and right, and so on....

Making sense of the markets can seem profoundly overwhelming and the way forward may appear to be cloudy. Making investment decisions, and for that matter, life decisions, can certainly test one’s nerve and courage.

What is "The Prize?"

In times like these, it is important to pause and reflect on why we are investing. What is the purpose? Is it to achieve reasonable long-term growth toward a given goal or a set of goals that need to be accomplished in the future? Is it capital preservation, and the preservation of real purchasing power? Most likely it’s a combination of multiple goals and objectives that will afford you and your family the ability to live the life you (and they) choose.

There is no more important time than now to think about the goals that are truly important to you and your family — what they are, when they need to occur, and, ultimately, the time and resources necessary to see those goals through to fruition.

Said more simply, the prize is your plan — your family’s blueprint for financial success. Because without it, one can easily get lost in the noise and news of the moment - remember, we are all human beings and, as such, we are highly susceptible to being exactly just that — HUMAN! And look, you’ve worked long and hard to accumulate the wealth you’ve so thoughtfully entrusted with us. It’s only normal to be afraid and panic when the markets fall or to be overly optimistic and euphoric when markets run with the bulls.

Our job, quite frankly, is to help keep you focused on your goals. Think of us as your financial Sherpa to guide you through turbulent times; or your financial fitness instructor that’s there to knock the doughnut out of your hand when you so want it most. Whatever visual euphemism you’d like to see us as, we are. We are quite simply your guide to help you achieve your goals and obtain financial success as YOU define it.

Remember, focusing on what you can actually control helps you gain clarity in unclear and uncertain times.

Keeping Perspective about the Markets

We pulled together some facts about past market volatility that you might find both interesting and helpful during this volatile time.

Investors who did not sell during or after the 2007-2009 bear market did NOT lose ANY money. Remember, this bear market witnessed a 56.8% fall from 10/09/2007 through 03/09/2009. In fact, investors who stayed invested are up over 200% cumulatively from the market bottom, and are up 52% from the market’s peak in October of 2007! Also, from the market bottom on 03/09/2009, there have been eight market declines greater than 6%. Investors that didn’t sell during or after any of those eight declines have not lost any money either!

We have had five major bear markets post WWII (defined as greater than a 30% decline). If you invested a dollar in the S&P 500 at exactly the wrong time — the very start of each of those bear markets — you would have anywhere between 45 cents and 67 cents per dollar when the pain was over. However, if you remained fully invested, on average how long would it take you to get every dime back? Well, four out of five times you got all or almost all of your money back in less than two years!

Historically, six of the ten best days in the market occur within two weeks of the ten worst days!

Some Thoughts on Market Timing

Concluding Thoughts

So what conclusions should we draw from these thoughts and facts?

Remember to remain focused on your goals or what you want to achieve with your money. Stick with your plan to achieve those goals, do not let market sentiment or momentum (whether positive or negative) distract you.

If you are concerned about market volatility, spend some time with your First Citizens relationship manager to talk about your investments and whether your goals have changed. Remember that market timing is very difficult and often influenced by emotions - plus you need to be right twice — when to get out of the market as well as when to get back in.


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