Ep 11 - Riding the Waves: Understanding Market Volatility and Recovery

Voiceover: [: 00:00:00

Now, your host.[00:00:30]

artners and co-hosts of, uh, [: 00:00:45

Ethan Hutcheson: Doing good j?

Jeb Graham: Yeah, doing well. Good. Good. We're, uh, day after tax day, uh, things have kind of cooled out for us.

ow, I guess the last time we [: 00:01:00

So this was basically the, the market had just gone down a [00:01:15] little bit. Uh, maybe, maybe five or 10%. We were just kind of talking about that. And then April 1st came along, uh, right after, right after April 1st. And that was when, uh, tariffs were enacted. Basically, Donald Trump kind of, kind of backed up some of the things that he had talked about [00:01:30] doing and the market did not like it at all for a couple of days.

o go ahead and continue that [: 00:01:45

Uh, because there's a, a million of them to reference. And I think there's a lot of 'em out there that help clients just kind of keep that long term perspective when the market's bouncing around. Um, and, and, and just to kind of [00:02:15] preface this, is, is, uh, you know, people have heard the saying that, that the grim reaper is undefeated, right?

history of the stock market, [: 00:02:30

But, uh, you know, we've had a lot of instances of volatility over the years and the stock market has always come back. Not only come back, but come back and gone to, to [00:02:45] new highs. And so. I think what we can do is just kind of pass it around. 'cause we were talking, we all three have different charts that we really like to reference and we, we reference a lot of the same charts, but, you know, we, we kind of have our favorites and I think, Ethan, we're gonna start with you, uh, to talk about the, these [00:03:00] bull and bear market charts.

e not technically. In a bear [: 00:03:15

So we never really know, uh, kind of forward looking what's gonna happen. But looking back historically, um, you know, I'm looking at a chart that, uh, first Trust puts out. Um, it's daily returns since 1942, and it talks about the [00:03:30] history of the United States bear markets and bull markets. Um, it's a really compelling graph because it shows, um, when these bear markets occur.

and how long they last. So, [: 00:03:45

Shouldn't even bat an [00:04:00] eye at those 10%. Corrections happen about every 16 months, and they last about 127 days. So 10% correction. A little more painful to kinda watch, but again, every 16 months, so about every year and, and some change [00:04:15] we're, we're having a, a 10% correction. You know, we could look at that as also opportunistic market's down 10%.

r clients on. Uh, we'll skip [: 00:04:30

So, so pretty recently. One thing we want to really [00:04:45] emphasize when, when these bear markets occur, the, the duration of the bear market, were uncertain. We, we don't know if it's gonna be 39 days or, or 335 days. There's really no way of, of telling how long they're gonna last. But what we do know is that when we're coming [00:05:00] out of these bear markets, bull markets tend to outlast, uh, bear markets as far as duration goes.

ing about this yesterday from: 2009

Yeah. Um, maybe

Jeb Graham: that, that might be the longest one in history, is I, I think it's one of the longest, if not the longest in history.

he, uh, uh, tech bubble, uh, [: 00:05:45

So. Very, very long bull markets. And, and as investors, you know, recency bias comes into the equation. We think, wow, stock market's been doing great for 10 years, you know, it's gonna do great the next 10 years, and then covid happens. So we had a, uh, [00:06:00] very sharp 33% decline. And then after that we had about two years of another, uh, uh, bull market that occurred and that that bear market.

, the overarching theme here [: 00:06:15

You [00:06:30] want to stay invested because the second you miss out on that first 10% of recovery, that's where you can really hurt yourself from trying to time the market.

se as an opportunity and not [: 00:06:45

Right. Because that's, and I know we're gonna go into that with Eric here in just a second when we're talking about diversification, but, but bear markets are the time where people can really buy things on sale and really make headway over time in their, in their portfolio.

Ethan Hutcheson: Yep.

Wymore: And stock market is [: 00:07:00

Ethan Hutcheson: That's right.

Eric Wymore: Yeah.

Ethan Hutcheson: Yeah, that's, that's a good, good analogy. Yeah. I know when I go to buy a t-shirt, if I know that it's gonna be 20% off next week, I'll buy the t-shirt next week. You know, I'll wait on it a little bit.

Eric Wymore: [: 00:07:15

Okay. So it's got a lot of different patterns on there that all come together that look like a quilt. The, [00:07:30] you know, before, I guess, lemme start that over again. So, um, one of the things that we, we wanna make sure that we do to help kind of coc or to, to mitigate some of that, those [00:07:45] drawdowns during that bear market is we wanna make sure that we have some kind of an asset allocation and asset allocation doesn't, you know.

ps mitigate it a little bit. [: 00:08:00

And as you can see. In the early 2010s, the REITs real estate investment trusts were, were really top performers. And then, you know, if you see it towards the back half, there were some of the lower performers and, [00:08:30] and fixed income was a good performer a couple of years when the markets are down. And then when the markets are going really well, they're usually at towards the bottom.

the last decade or so, and. [: 00:08:45

It's got [00:09:00] some, some mid cap, it's got some small cap, it's got some international or, uh, developed markets. Got some emerging markets, as well as fixed income cash. And, and you can see that over time. [00:09:15] It's the single and double hitter. It's never the home run, it's never the strikeout. It's kind of right in the top to uh, uh, top performer.

say, well, why aren't we in [: 00:09:30

And for those times when we are seen here over this first and second quarter of 2025, we really like to have an asset allocation portfolio 'cause it's stock very, very well. Yep.

r the years, there's always, [: 00:10:00

It does make you realize that you wanna own everything because, or not necessarily everything, but you wanna [00:10:15] own a diversified portfolio. 'cause you just never know at the beginning of the year what's gonna be that leader and what's gonna kind of, kind of run like that. And it's just kind of fun each year.

t the year and see what did, [: 00:10:30

Eric Wymore: Yeah. Perfect examples. Large cap, you know, they did really well in 2023. 2024.

do as well compared to that. [: 00:10:45

Ethan Hutcheson: I always, I always like looking at cash on this 'cause you know, cash people wanna sell out when the market's down and go to cash and you know, find cash on this chart.

There's [: 00:11:00

Jeb Graham: What was the year? Was it 2022? 2018? 2018? Well, 22 cash was good.

Ethan Hutcheson: It had to be

Jeb Graham: up there Yeah. In: 2022

Because they, 'cause you had a money market that was paying 5% or whatever. Uh, whereas in years past, you know, you haven't been able to specifically since basically the financial crisis through, through maybe [00:11:30] 2022 basically. Yeah,

Ethan Hutcheson: yeah, yeah.

led Crisis and Events, and I [: 00:11:45

I feel like this is the one that, you know, the market's not gonna recover from. And I think this, uh, chart that First Trust put out [00:12:00] a couple years ago, which was in. A presentation that they had that, that called, uh, it was a client resource kit, just called Markets in Perspective. Okay. And they had the very first chart was called Crisis and Events.

since [: 00:12:15

Market turmoil. Okay. And just to, to name a few here. Um, and these are ones, you know, 'cause this goes from 1970 to 2025. Okay. But we've, we've had, you know, I, I was born in 1977, so if I'm gonna start at like [00:12:45] 1988, some of the things that I can kind of remember, uh, and that we've all kind of talked about and people thought that, hey, maybe this is the time that the stock market is gonna never recover and it always has.

late eighties, you had black [: 00:13:00

We all remember that one. That was a big deal, a great financial crisis. We had a Boston Marathon bombing, and then you had COVID-19 that happened in 2020. All of these [00:13:30] things, you know, as they occurred, the market reacted in certain ways, some of 'em bigger than others, like obviously the great financial crisis, 2008.

point earlier, it was really [: 00:13:45

Now we can't guarantee that's gonna happen in the future, [00:14:00] but if you're a status statistician, uh, you would say that, that the odds are that every time we go through one of these events, yeah, we're gonna have some market turmoil. And if you can kind of flip the, flip the script and think of that as a, an opportunity to buy some things at a [00:14:15] lower level, you know, historically that's worked out really well for you because the market's come up and it's, it's even gone on to, to higher to higher.

, [: 00:14:30

Uh, and here we [00:14:45] are, you know, that if you look back from 1970, we're still averaging 10.8% in the SP 500.

ier and think, you know, one [: 00:15:00

But if you looked at 1987 as a whole, it actually

Jeb Graham: returned

Eric Wymore: positive. Yeah. Great. It always, and by the way, black

st of this [: 00:15:15

I think that they started to put those stipulations as to when the, you know, right now if the, [00:15:30] if the New York Stock Exchange or the SP 500 is down, uh, I think it's 7% in a day, they actually halt trading for 15 minutes and then if it gets to 13%, they halt it again. And if you get down to 20%, they're closed for the day.

%. [: 00:15:45

It talks about each year how the market, stock market ended up at the end of the year versus how far it was [00:16:15] off. Its most recent high. Sometime during that year, I. Basically what it says is, despite average intra year drops of 14.1%, annual returns were positive. And 34 out of 30, or I'm sorry, 34 [00:16:30] out of 45 years.

was down [: 00:16:45

Okay. Then now that's an incredibly drastic example. Uh, but there's, but if you go back even, uh, to [00:17:00] 2023, it's like it was down, we ended up with a, or 2024, we ended up with a 23% positive return on the s and p 500. But at one point in time it was down 8% off of its most recent high. So it's hard to get through a year without having some hiccups.

Right. And so, uh, I think. [: 00:17:15

Eric Wymore: Absolutely. I mean, I think that's the big question. You know, anytime [00:17:30] we get all the time, like, what's the market gonna do?

[: 00:17:45

Jeb Graham: You know, there, there's been, I think only one rolling 10 year period where the s and p 500 was down and it was like just such a small window of time.

It was like between: 2008

And I think those are, those are all great charts. So if you're a [00:18:15] client, you're gonna see us referencing those if you come to us. You know, you know, worried about the market and that sort of thing. And, um, so guys, thanks for being on and, uh, this is Metcalf money moment. Sign it off.[00:18:30]

. For more expert advice and [: 00:18:45

Disclaimer: Jeb Graham, Ethan Hutchinson and Eric Wymore are registered representatives with and [00:19:00] securities offered through LPL Financial Member FINRA SI PC Investment advice offered through W CG Wealth Advisors, a registered investment advisor, W CG Wealth Advisors and Metcalf Partners Wealth Management is AR separate entity entities from LPL Financial.

o provide specific advice or [: 00:19:15

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and invested into.