A Lesson From the School of Rock (and a Financial Adviser) as the Markets Go Around and Around

Chuck Berry released the song "Johnny B. Goode" on March 31, 1958. If you happened to pick up the single and were smart enough to flip it over and play the B side, you got to hear another amazing song: "Around and Around."

The Rolling Stones covered that song on their second U.S. album, 12 X 5, in 1964. They performed it during their first appearance on The Ed Sullivan Show, and it was a regular part of their set on tour in 1964 and 1965.

"Around and Around" has also been covered by other notable artists, including David Bowie, The Animals, The Swinging Blue Jeans, The Grateful Dead, Meat Loaf, Pearl Jam and 38 Special.

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Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

What does any of this have to do with successful investing and wealth management? Well, over the last seven years, investors have had to deal with the stock market going "Around and Around"… a lot.

Market downturns and rebounds

Over the seven years from July 1, 2018, to June 30, 2025, the stock market experienced four downturns of 20% or more, as measured by the S&P 500 on an intraday basis.

But the S&P 500 index also rose from about 2,800 to just over 6,200 over those seven years. This represents an increase of about 3,400 points, or roughly 121%. What did you, as an investor, have to do to be successful through these four significant downturns?

Most importantly, you had to stay invested. If you panicked and sold out of the market during any one of these downturns, you most likely missed a significant portion of the subsequent rebound.

Bear markets

A bear market is typically defined as a decline of 20% or more in the stock market. Most of these types of drops have happened concurrently with economic downturns.

Since the end of World War II, the S&P 500 has experienced 14 bear markets, of which 11 occurred during a recession. However, growth scares of 1962, 1987 and 2022 caused the market to drop more than 20% without the economy falling into a recession.

The most severe postwar bear markets have coincided with significant financial and economic downturns, including:

• 1973-74 (-48.2%): Sparked by high inflation and the Arab oil embargo
• 2000-02 (-49.1%): The bursting of the dot-com bubble, the events of 9/11, and Enron WorldCom
• 2007-09 (-56.8%): The subprime mortgage crisis and the failure of AIG & Lehman Brothers

Why were investors so rattled this year?

Three downturns in the past 15 years only marked a 20% drop on an intraday basis. By the time the market closed on those days, it had made up enough ground to close with losses 19% each time, so it was not technically a bear market.

These include the fiscal cliff downturn in August 2011, the Federal Reserve Bank hiking panic from September to December 2018 and the most recent trade/tariff scare from February 19 to April 8 this year.

Each of these may not have cleared the hurdle to be technically called a bear market, but I can tell you from client responses and the emotionally charged discussions that we had during that time, they sure felt like it.

This most recent downturn seemed to have people more nervous than usual. I believe this is a combination of our country's emotionally charged political backdrop and the never-ending negative drumbeat of our 24-hour cable news and social media spin cycles.

We were told that this was the fifth fastest drop of 10% or more in the past 75 years. The VIX fear indicator spiked to levels only seen during the COVID lockdowns in March 2020, the failure of AIG and Lehman Brothers in September 2008, and the stock market crash of October 1987.

Despite market pundits and prognosticators screaming that the end of the world was coming, for at least the seventh time since the turn of the century, the promised event was once again postponed.

I did what I have learned to do over my 35-plus years as a financial adviser: I tried to help my clients avoid responding emotionally and doing the wrong thing at the wrong time.

Maintaining perspective

I want to offer some encouragement and perspective for you. Despite the news and noise, you not only survived but thrived during the fourth 20% downturn we have experienced in the past seven years — if you didn't panic and sell low.

If you had done so, you would have missed the subsequent rebound to new all-time highs, which happened in less than 90 days from the anxiety-induced bottom of the market in early April.

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By trusting in your diversified portfolios, your financial plans and the long-term historical success of capitalist, free-market economies, you could claim victory and score a financial touchdown. You are to be congratulated. Building wealth is not easy. If that were the case, everyone would be wealthy.

Many people panicked and did the wrong thing at the wrong time. However, as Warren Buffett's longtime friend and business partner, Charlie Munger, used to say, it's much easier to build wealth if you don't stop the compounding.

As I conclude, I acknowledge the discipline and resilience that many of you demonstrated. Navigating market volatility is never easy, and the recent 20% market downturn was no exception.

Staying invested during uncertain times can be challenging, but history shows that markets have consistently rebounded after periods of decline and then gone on to set new highs.

While past performance is not indicative of future results, maintaining a long-term perspective has historically been a key component of successful investing.

There are times when being an investor feels uncomfortable, and the market is going "Around and Around." Just remember the lessons discussed here today. It will be critical to your future success the next time we go through some economic or geopolitical episode, because, inevitably, we will.

Securities and advisory services offered through Cetera Advisors LLC, member FINRA, SIPC, a broker/dealer and a registered investment adviser. Cetera is under separate ownership from any other named entity.

A diversified portfolio does not assure a profit or protect against loss in a declining market.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

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