Climbing the Wall of Worry

Climbing the Wall of Worry

On December 31, 2009, the S&P 500 Index closed at 1,115.10.

Ten years later on December 31, 2019, the index closed at 3,320.78.

During the decade, the S&P 500 gained 198% on a price-only basis and 257% on a total return basis which includes the reinvestment of dividends.

As we turn the page on the decade, I think it’s worth revisiting a sampling of the litany of threats and ominous headlines the market overcame during the course of the decade:

  • 2010: Greek sovereign debt crisis and bailout; Deepwater Horizon disaster; Arab Spring
  • 2011: U.S. government debt downgrade; Syrian civil war; Japanese earthquake, tsunami and Fukushima partial nuclear meltdown; Occupy Wall Street movement
  • 2012: Eurozone double-dip recession; Superstorm Sandy
  • 2013: Taper tantrum
  • 2014: Russia invades Ukraine; Ebola outbreak
  • 2015: Oil prices decile sharply; U.S. dollar spike
  • 2016: Brexit vote; U.S. political uncertainty and division
  • 2017: Hurricanes Harvey, Irma and Maria
  • 2018: Recession fears; 20% S&P 500 sell-off in fourth quarter
  • 2019: Recession fears; U.S./China trade tensions; Brexit uncertainty; U.S. political uncertainty and division

It’s often said that the markets climb the proverbial wall of worry—a statement which refers to the market’s resilience with faced with potential stumbling blocks. No doubt the 2010s embodied this statement perfectly.

The bottom line is that there will always be scary headlines and uncertainty in the markets. One of the keys to successful investing is maintaining a long-term perspective and discipline in the face of uncertainty. An investor who held these traits during the past decade was likely well rewarded for their temerity. On the other hand, an investor who succumbed to fear and who sold in the face of any one of the threats du jour likely would have missed out on a significant portion of the market’s incredible gains (absent, of course, possession of the remarkable and extremely rare ability to successfully time selling and subsequent buying activity).

Experience has taught us that one of the most effective ways to promote this needed discipline and long-term perspective is for investors to hold a portfolio that is well calibrated to their unique financial circumstances and risk tolerance. For many, this means holding enough “safe” or “liquid” assets that are free from the vicissitudes of the market so as to enable them to recover from future down cycles without needing to sell stock holdings (which should rightfully be earmarked for long-term growth) to fund planned spending or out of fear about their ability to do so in the future.


All index return figures from Dimensional Fund Advisors

Important Disclosures

Kathmere Capital Management (Kathmere) is an investment adviser registered under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply any level of skill or training. The information presented in the material is general in nature and is not designed to address your investment objectives, financial situation or particular needs. Prior to making any investment decision, you should assess, or seek advice from a professional regarding whether any particular transaction is relevant or appropriate to your individual circumstances. This material is not intended to replace the advice of a qualified tax advisor, attorney, or accountant. Consultation with the appropriate professional should be done before any financial commitments regarding the issues related to the situation are made.

The opinions expressed herein are those of Kathmere and may not actually come to pass. This information is current as of the date of this material and is subject to change at any time, based on market and other conditions. Although taken from reliable sources, Kathmere cannot guarantee the accuracy of the information received from third parties.

An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance to certain asset classes. Index performance used throughout is intended to illustrate historical market trends and performance. Indexes are managed and do not incur investment management fees. An investor is unable to invest in an index. Their performance does not reflect the expenses associated with the management of an actual portfolio. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. All investing involves risk including loss of principal. Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal, and potential liquidity of the investment in a falling market. Past performance is no guarantee of future results.

S&P 500: Standard & Poor’s (S&P) 500 Index. The S&P 500 Index is an unmanaged, capitalization-weighted index designed to measure the performance of the broad U.S. economy through changes in the aggregate market value of 500 stocks representing all major industries.

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