Nervous About the Markets and Economy? Consider History
To put things in perspective, focus on what you can control and remember that the ups and downs of the markets and economy can be cyclical.


If you're feeling like the financial news is coming at you fast and furious, you're not alone. Between inflation, rising interest rates, the markets stumbling and recent bank failures, there's a lot going on.
One of these events alone could be overwhelming. Taken all together, they seem downright scary.
Before you let it all overwhelm you, stop and take a deep breath. The key to getting through it is to put things in perspective. Focus on what you can control and not on what you can’t control. The direction of the Fed’s interest rate hikes? You can't do anything about that. A sound investment strategy and ample emergency savings? Now that's something you have a big hand in.

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Let's look at some simple truths that can help put the current financial news in perspective.
Market declines are inevitable.
Looking at the balance on your 401(k) plan is a lot less enjoyable today than it was a year ago. Since reaching a high in early January 2022, the S&P 500 was down about 12% in early April. But throughout 2022, the index had dropped more than 20% off its high, and every day seemed to bring bigger declines.
At times like these, I advise my clients to adopt a long-term perspective. The market is built to last, even though there might be periods of volatility along the way.
In 2008, the S&P 500 fell 38% due to the subprime mortgage crisis. Almost daily, there were new headlines about company bankruptcies and bank bailouts. But in March 2009, stock prices hit a bottom and started rising steadily, closing out 2009 with a 27% gain. With just a few brief periods of interruption, the bull market lasted for more than a decade.
More recently, stocks fell sharply at the beginning of the COVID-19 pandemic as people lost jobs and economic activity ground to a standstill. The S&P 500 dropped nearly 35% from Feb. 19, 2020, to March 23, 2020. But then it became clear that the government planned to support the economy with stimulus funds and interest rate cuts, setting the stage for a stock rebound, and the S&P 500 doubled from March 2020 to December 2021.
Markets come back fast.
Investors who pull up stakes when things seem at their worst don't get to participate in the eventual rebound. For example, research from JPMorgan shows that someone investing in the S&P 500 over the last 20 years would have an annualized return of 9.7%. But if that same investor missed just 10 of the market’s best days during that time, their annual return would drop to 5.5%.
What's more, those best days tend to occur less than a month after the worst days. In other words, you need to be in the market when things seem at their bleakest.
Investing through a workplace retirement account can help you keep your emotions in check. By dollar-cost averaging — investing the same dollar amount at each pay period — you will continue to purchase shares at all different prices. When markets are down, you'll be able to purchase more shares, and when they're higher, you'll be able to purchase fewer.
Retirees should think long term, too. Even though you might be at the point where you need to start spending down your nest egg, you could still have 20 or 30 years left in retirement. If you want your money to continue to keep pace with inflation, investing in stocks is a must.
In order to keep your emotions in check and avoid selling shares while the market is down, I recommend retirees practice a “bucket strategy," which involves setting aside up to three years of expenses in risk-free areas such as certificates of deposit or money market accounts. You can spend down this money while the market is in free fall so you don't have to lock in losses. You can replenish that short-term bucket by selling appreciated stocks once the market recovers.
Prepare for a recession.
According to experts, a recession happens when the nation's gross domestic product is down two quarters in a row. We aren't there yet, but that doesn't mean it might not happen.
Again, take a long-term view and keep in mind that economies are cyclical. On average, recessions last about 10 months, according to the National Bureau of Economic Research. After that, the economy typically enters an expansion phase when the jobs are once again plentiful, and wages rise. If you've lost your job, it might take time to get a new one, but the economy will recover.
If you're nervous about losing your job, prepare now. Make sure you have emergency savings. For most people, that means that having enough savings to cover about six months of expenses. But if you work in a volatile field, you might consider more. Of course, this won't take away the anxiety of losing a job, but it will give you some breathing room while you line up a new job.
Banks are safe, despite some failures.
Another source of anxiety for many is the recent collapse of several high-profile banks. You may be wondering if your bank is next and whether your money is safe.
While the collapses of Silicon Valley Bank, Signature Bank and others is disturbing, it's important to keep things in perspective. Bank failures aren't as uncommon as you might think. Since 2001, there have been 563 bank failures, the Federal Deposit Insurance Corp. (FDIC) reports. However, that doesn't mean that depositors lost their life savings.
Currently, bank deposits are insured up to $250,000 through the FDIC — although Congress has talked about raising that limit. Even though some deposits in the failed banks exceeded the FDIC limit, regulators stepped in to guarantee them. Another thing to keep in mind: Most people don't have more than the FDIC limit sitting in a bank account in the first place.
If you do, then it's wise to hedge your bets. The FDIC will insure $250,000 per depositor per bank. If you have money in a CD, a checking account and a savings account, those sums are all added together. So, if you have more than $250,000 in banked assets, you should consider spreading out your deposits among more than one bank.
Keep your eyes on the long term.
No one likes going through periods of uncertainty. Unfortunately, they're inevitable and part of the normal economic cycle. The best thing you can do is maintain a long-term perspective. You can't control markets or whether the Federal Reserve will raise interest rates.
You can control how you respond to those events. If you stay calm and remember some market history, it will help you get through the current volatility. And when conditions change, you'll be ready.
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Erin Wood has over two decades of experience humanizing financial planning. As SVP of Advanced Planning at AssetMark, Erin leads innovation for new wealth solutions, secures strategic industry relationships and oversees a team of specialists who work directly with advisers and their high-net-worth clients. Erin focuses on delivering tailored strategies for estate planning, tax efficiency, retirement planning and multigenerational wealth transfer to help financial advisers keep up with evolving client demands.
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