So something happened Wednesday & continued on Thursday. Something that seems to be completely out of the ordinary over the past 10 years of bullish markets. A 3% one-day S&P 500 drop will surely halt the record gains that the economy has been pacing for what seems like forever. And sure, yesterday seems to be a moment of panic and in the short term future you may not expect another 2008 to happen, but it is a good reminder that all good things must come to an end. And when it does end, what will the reaction to this record-setting run really be?
Expectations are a funny thing. Expectations are a blend of what happened in the past that turns into what you think should happen in the future. If things were bad in the past, expectations are probably not going to be very high. But when the past has been good (or in this case, REALLY good) the expectations are, well, that the future will somehow be able to maintain that in the eyes of many. But, what is the name of this post?
I’m a big time football fan. And like many football fans, I have a team. For most of my fanhood, that team hadn’t been very good, and thus, I had very little expectations. Any playoff berth was a victory in my mind. But something changed for them in 2015, when they went on to win Super Bowl 50. They literally couldn’t have ended the season on a better note and my elation for this team had never been higher. But now we find ourselves in 2018, and the outlook is a little different. After finding themselves treading water through the ocean of mediocrity I find myself not as satisfied with their performance as I was before 2015. After going through the good times I calibrated my expectations to be something more than what they should. When in reality, their decline from the top should have been expected, since they literally had nowhere else to go but down.
I don’t want to make a prediction on where the market will be in 3 years, if it’ll go from the top of the world down to mediocrity or even lower, but while we aren’t all that removed from the highs and elation of what this incredible run has been, now may be a good chance to evaluate what your expectations should be. Is your reliance on the unsustainable past setting you up for disappointment and anger for what the future will be? It will almost certainly be a step down. If you have confidence in a bounce back after Wednesday’s chaos that’s fine, but remember, nothing lasts forever.
Cody Hybiak is an Advisor Services Associate & Investment Advisor Representative with SEM. He assists SEM's advisors in reviewing their investment allocations as well as importing and monitoring the data that generates the signals inside SEM's trading systems. Cody received his Bachelor of Science degree in Business Administration (Accounting emphasis) from the University of Arizona with an emphasis in Accounting. He joined SEM in March 2017.