Broker Check
Negative News Doesn't Equal Negative Markets

Negative News Doesn't Equal Negative Markets

October 31, 2023

Key Takeaways:

  • Negative news creates fear for investors which can lead to emotional investment decisions due to worries about ensuring negative markets.
  • Negative news can provide great investment opportunities, but it takes a strong stomach and the ability to shut out the noise to do what's right for the portfolio. 

Scary headlines, recessions, and bear markets all have negative connotations and create fear in the minds of investors.  Fear drives emotions, which can lead to investment mistakes.  Moving out of the market at the wrong time can cause long-term damage to portfolio values.

Scary Headlines

News headlines tend to be sensationalized, trying to create a reaction.  But bad news can provide some great investment opportunities. Below are six different major events over multiple decades and the subsequent 10-year annualized return of the US equity market.  

Source: Capital Group, "Guide to Market Recoveries, 2023 edition", US equity market represented by S&P 500

Recessions

Recessions create fear that worse times are to come. The economy is suffering, and people need to buckle down and prepare for harder times. But economic data is backward looking, while markets are forward-looking.

As shown below, in five of the last six recessions, US equity markets trended upwards and saw some substantial returns. The reason for this is that the market is looking forward to an improving economy and tends to rebound six months prior to the economy bottoming. 

source: Factset. US equity market represented by S&P 500

Bear Markets

Bear markets can be painful for an investor's portfolio and create a stomach-churning ride. Emotions run wild, and staying invested, let alone investing in the market, is gutwrenching. But the other side of a bear market is where some of the best returns are found in the market. 

Source: Capital Group, "Guide to Market Recoveries, 2023 edition". US equity market represented by S&P 500

Looking at the five deepest bear markets, the average five year annualized return was 23.1%. But what's interesting, as shown above, is that most of that return is driven by returns seen in the first year following the bear market.

Shutting Out the Noise

In today's world, news and opinions hit us from all angles. There's no wonder emotions run wild, and worries rise about investment portfolios. But the negative news does not always mean negative markets. In fact, it can actually provide some great investment opportunities.

While it's hard to stay invested during these times, putting cash to work in the market is even harder. But if investors can shut out the noise, focus on the long term, and take that gut-wrenching leap, portfolios can benefit from some of the best returns seen in the equity market.

To prove this point, below is a graphical representation of $100 invested on a monthly basis into the US equity market starting in 2007. Each data point represents the value of each $100 as of June 2023. What is clear to see is that the $100 invested during the depths of the Global Financial Crisis had the greatest value in the portfolio.

Long-term returns are only achieved by staying disciplined, shutting out the noise, and doing what's right for your long term goals. And that's spending time in the market rather than trying to time the markets.

Source: Zephyr Style Advisor. US equities represented by S&P 500

Important Information

Securities products and advisory services offered through Park Avenue Securities LLC (PAS), member FINRA, SIPC. OSJ: 6115 Park South Drive, Suite 200, Charlotte, NC 28210, 704-552-8507. PAS is a wholly owned subsidiary of The Guardian Life Insurance Company of America® (Guardian), New York, NY. Genesis Wealth Planning is not an affiliate or subsidiary of PAS or Guardian. This material is intended for general use. By providing this content Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. 2023-163006 Exp. 3/24

This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345. 

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation. It is not possible to invest directly in an index. Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly. Index performance assumes the reinvestment of dividends.

Investments in equities, bonds, options, and other securities, whether held individually or through mutual funds and exchange-traded funds, can decline significantly in response to adverse market conditions, company-specific events, changes in exchange rates, and domestic, international, economic, and political developments. Bloomberg® and the referenced Bloomberg Index are service marks of Bloomberg Finance L.P. and its affiliates, (collectively, “Bloomberg”) and are used under license. Bloomberg does not approve or endorse this material, nor guarantees the accuracy or completeness of any information herein. Bloomberg and AssetMark, Inc. are separate and unaffiliated companies.

AssetMark, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. ©2023 AssetMark, Inc. All rights reserved.

106579 | C23-20491 | 10/2023 | EXP 10/31/2025