The last couple of weeks have been very tough for the stock market. Stocks have been under a great deal of selling pressure due to the trade war with China.
Last week I was talking with a friend of mine who urged me to “watch my stocks and be careful”.
I didn’t ask her what she meant by that, but I could pretty much guess that her advice would be to sell if the market got too volatile or scary. I certainly don’t think she was advising me to buy more stocks as the market went lower.
I then gave her the same advice that I give to readers of my blog: No one ever made a dime panicking!
From 1950 to 2019, the S&P 500 has gone up more than 100 times in value. During this same time period, the following events have taken place:
1. Nine recessions
2. The Korean War
3. Rising interest rates
4. The Red Scare
5. Kennedy’s assassination
6. The Civil Rights Movement
7. The Vietnam War
8. The OPEC embargo
9. Double-digit interest rate increases
10. The Beirut Embassy bombing
11. The U.S. bombing of Libya
12. Black Monday, in which the market fell 22%
13. The savings and loan crisis
14. The Iraq War
15. The housing slump
17. The Asia financial crisis
18. Long Term Capital Management’s collapse
19. The Russian financial crisis
20. The September 11, 2001 attacks
21. The Afghanistan War
22. The bank crisis
23. The housing Crisis
24. The European debt crisis
25. The China slowdown
26. Brexit
27. The US/China trade war
As you can see, we have seen our fair share of economic and geopolitical crises over the last 69 years. Yet the market has been extremely resilient.
In 1950, the S&P 500 was around 80. Today it is at 2,859.
If you look at the history of the stock market, you will see that there is absolutely no need to panic when we’re faced with something like the current trade war. I can’t tell you when it will end, but I can tell you that it will end.
Neither America nor China wants this to go on for years; economically, both nations have something to lose.
This is just another bump along the historical road – nothing more.
The biggest mistake you can make right now is to sell your stocks because of this short-term uncertainty.
Even if you own a company like Apple (NASDAQ: AAPL) or Starbucks (NASDAQ: SBUX) which has a lot of exposure in China, I would just sit tight and wait.
This too shall pass.
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