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Do What Jack Said

Jonathan Clements

THIS IS A TEST. This is only a test. This is a test of our stock market resolve. Remember how you told yourself you’d stand pat during the next stock market decline, that you wouldn’t get rattled like you did in 2008-09 and early 2020? That moment has arrived.

Like any person with an ounce of decency, I’m appalled by Russia’s invasion of Ukraine and the unnecessary death and suffering that will result. But I’m also confident that the Russians will come to regret their actions. Can you think of a recent invasion that turned out well for the invader?

But while I worry about the Ukrainian people, I’m not much concerned about the stock market’s decline. It’s not because I have a crystal ball. Unlike the talking heads on the financial cable TV shows, I have no idea what will happen next in the financial markets. But I’m certainly not selling my stock funds. In fact, if the decline continues, I’ll be investing more and, if the drop is steep enough, a whole lot more. Feeling nervous? Keep these four points in mind.

  • The drop in share prices has brought the S&P 500 back to where it was in June 2021. Unless you purchased stocks for the first time last year, you’re likely sitting on handsome profits.
  • Market timing is a fool’s errand. If you sell now, you’ll be selling at 12% below the S&P 500’s Jan. 4 all-time high. By the time you muster the nerve to buy again, there’s a good chance the market will be significantly higher.
  • Stock prices fluctuate far more than intrinsic value. Including dividends, the S&P 500 is down 11% in 2022, with further losses on deck today. But the intrinsic value of corporations hasn’t fallen nearly that much—and any decline has been driven largely by rising interest rates, not geopolitical turmoil.
  • In the end, what stock market investors care about is company earnings. Ask yourself: What does Russia’s invasion of Ukraine mean for corporate profitability? Very little, I suspect.

Today, stock market investors are being tested. The late Jack Bogle, founder of Vanguard Group, would constantly exhort investors to “stay the course.” Sounds like great advice to me.

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