Staying the course to reach the view

As we recently saw, stocks around the world fell sharply due to heightened recession concerns which were sparked by a softer than expected monthly employment report. This came from a perfect storm of mixed second-quarter earnings results across industries, uncertainty around the U.S. presidential election, unwinding of the Japanese Yen carry trade, and rising geopolitical tensions overseas against the backdrop of seasonally thin August trading conditions in the capital markets. The news sent shockwaves, dampening the mood of investors and even prompted some practitioners to urge the Federal Reserve to make an emergency interest rate cut.

The twists and turns of the investment journey

However, it’s important to see the forest for the trees and evaluate a more fulsome range of economic data. Although Monday, Aug. 5 was the worst day for stocks since Sept. 2022, Wall Street continues to recover from the losses and investors are also finding the light at the end of the tunnel as positive news continues to emerge, helping the S&P 500 experience its best day on Thursday, Aug. 8 since Nov. 2022.

Inflation continues to slowly moderate toward the Fed’s 2% target, with headline CPI slowing to 2.9% year-over-year in July and despite a mixed employment report a few weeks ago, recent reports show jobless claims continue to fall, which shows some resiliency in the labor market. When paired with the recent retail sales data, which exceeded expectations by growing 1%, and improving consumer sentiment, the economic footing of the economy appears to be relatively sound. In fact, the economy grew 2.8% in the second quarter, a trend of slow growth that we hope will continue.

The roadmap to maintain a long-term perspective

Although market swings can be uncomfortable for investors during the moment, these recent events are a great reminder that drawdowns – even during bull markets – are completely normal and expected. Although we can’t predict the markets’ next move, preparation and patience have historically proven to be the most valuable traits of successful long-term investors.

Market volatility has always been a concern for investors – whether you are a seasoned practitioner or a beginner – but while these situations might seem unprecedented, markets have seen and tackled these types of challenges before and historically finish positive more than 70% of the time.

According to Lincoln Financial’s Market Intel Exchange, the best and worst days in the stock market often happen in close proximity to one another, making it nearly impossible to accurately time the market. In fact, history shows that six out of the best 10 days happened within 10 trading days following one of the worst 10 days.

The chart below further emphasizes the importance of staying invested by showing the growth of a portfolio that was fully invested from 2004 through 2023, and the opportunity cost of missing the best 10, 20 and 30 days over that same period.

So, while markets might remain volatile in the near-term, long-term investors who prepare for volatility, exercise patience and capitalize on opportunity have historically been rewarded over time by staying the course in a diversified portfolio. 

At Lincoln, we understand that it can be challenging to understand uncertainty in the market. We leverage our team of investment professionals and industry-leading asset management partners to bring timely insights and deep-dive perspectives that are needed when making important investment decisions.

More insights from Lincoln Financial and its network of asset management partners can be found on the Market Insights page on LincolnFinancial.com.

Past performance does not guarantee or predict future performance.

Lincoln Financial Group is the marketing name for Lincoln National Corporation and insurance company affiliates, including The Lincoln National Life Insurance Company, Fort Wayne, IN, and in New York, Lincoln Life & Annuity Company of New York, Syracuse, NY. Variable products distributed by broker-dealer/affiliate Lincoln Financial Distributors, Inc., Radnor, PA. Securities and investment advisory services may be offered through non-affiliated entities.

This material is provided by The Lincoln National Life Insurance Company, Fort Wayne, IN, and, in New York, Lincoln Life & Annuity Company of New York, Syracuse, NY, and their applicable affiliates (collectively referred to as “Lincoln”). This material is intended for general use with the public. Lincoln does not provide investment advice, and this material is not intended to provide investment advice. Lincoln has financial interests that are served by the sale of Lincoln programs, products, and services.

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