Coffee with Brendan: Market Volatility

Over the past few weeks, the market has been volatile, fluctuating hundreds of points each day. Whenever this much movement occurs, people tend to get anxious and want to pull money out of the market. They worry that “this time is different,” and their portfolio may not bounce back. In this episode, Brendan talks about the history of market ups and downs, illustrates the normalcy of market volatility, and explains why he’s advising most of his clients to stay invested.


Topics Discussed:

  • History of market crashes over the past 50 years

  • Why it’s unlikely that “this time is different”

  • Concerns over the national debt

  • The danger of attempting to time the market

Transcript:

Welcome to another coffee with Brendon holiday edition, as you can see from the Christmas tree, and today is December 6. And the last couple of weeks, the market has been very, very volatile, moving, you know, hundreds of points each day. And I've actually started fielding some of the phone calls from y'all, where people are starting to think as the market gotten a little bit too top heavy, and it's time to start taking some money off the table.


So this is a conversation where I'm not going to say yes or no, that the market is going to go up, the market's going to go down. But what I do want to show you is kind of a history lesson on what happens with the market and that every single time you hear someone say this time is different, whether it's on the news, whether it's your friend, whether it's your neighbor, you know, I can't tell you how many times I've heard this time is different, and it may be may be absolutely different. But at the same time, it's kind of the same general theme, and today's coffee with Brendon, we're gonna walk through that a little bit and show you that this theme is not a new one.


So I'm going to share with share my screen and on the screen today is a timeline a whole list of all these different time life, or excuse me, Time magazine cover stories. And what you can see in the front is the cover story, what you see in the back is what the stock market did. So long story short, not not surprisingly, to probably a bunch of you that the market has gone up for a long period of time. And even with some of the crazy things that have happened over time, the market has gone up, gone down a little that was 2000 gone down a little 2008. But then, you know, the grand scheme of things way up. And there have been some pretty nasty pieces of news that have come along the way but still, you know, the the general trajectory of the market is up. And that's the thing that I think everyone needs to kind of take, take a moment to pause and just realize that volatility is normal. market goes up market goes down, obviously, when you have these big giant drops, like we had in the 2000s like we had in 2008. You know, that's very nerve racking.


But again, some of these some of the same themes that we've that we're seeing today are themes that that have we've already seen in the past. So let's zoom in on a couple of days. And let's focus on 1972 1972. here's the here's the story right here. Is the US going broke, you know how many times have we heard that and just the last 10 years with the national debt being the way it is. With that said, I'm not going to dismiss the national debt, as some of you have heard from him. That's one of my things that I'm concerned about. But this is something that has been in the news for over 40 years, you know, is the US going in debt.


Fast forward, you know, you can see some of these. But let's fast forward to 1987 1987, the market dropped 20% In one day in September. It was because of you know, these new things called computers and computer trading and all that kind of stuff. But long story short, the market dropped 20% Can you imagine the Dow Jones right now is in the 30 1000s? Can you imagine if the Dow Jones dropped 6000 points in one day? I think that would rattle a few people. But that's what happened.


And again, now we have the benefit of hindsight to look back on it and not and realize, Oh, that wasn't that big a deal. You know, one of the little nuggets of trivia is that 1987 The market actually finished on a calendar year basis up that year. Even with that 20% drop on that day in, you know, Black Monday, in September 1987. Let's keep going. You know, we have the 1990s pretty much George Bush one. It was all about the economy. And frankly, he lost the presidency to Bill Clinton, because the because we're in a giant recession. That was where he had said, you know, he made the pledge, no new taxes and eventually had to go back on that, on that. That promise to the American people.


Of course, we have the early 2000s You know, where we had Enron and you know, that was I just listened to a podcast on that. That was absolutely fascinating. All the different firewalls that that we first threw in order for Enron to actually happen then we have 2008 You know, of course ever No one remembers 2008. You know, that was a pretty nasty time in the markets.


Let's shift this over to the right. And, you know, we keep going down this this road, you know, you can see, you know, jobs jobs was, you know, jobs and unemployment have popped up a few times in this timeline. But 2010 were nervous about about jobs. This one here is a particularly interesting one. And I And I've mentioned this to a number of clients 2011, the great American downgrade, that's pretty much the result of what happened when our credit scores, the United States got dropped a notch from the top score down down a notch, the market dropped 20% in that short period of time, in three months, three months, it took to drop 20%, that was a pretty concerning time specifically for me, because it was something that was on my mind, still is on my mind. And then you know, and certainly something that that provoked a lot of anxiety and a lot of volatility in the market.


Fast forward all the way to 2016. Now, this one's an interesting one. And again, I've probably mentioned this to a few people on this on this, but this number here is an interesting number. If I can zoom in here 42,009 98 That is the the amount of debt that every American man woman and child actually has. So if all of us in 2016, paid to the to the creditors of the United States, $43,000 me as a fan, you know, I have a family of four, you know, if I if I cut a check for, say $43,000 times, like for people $172,000 Is what I as a family would have to pay to pay off our debt in 2016. Well, guess what? That debt is double. So that means that my family of four now actually has to pay $344,000. And that's pretty much what it would take for us as an American people to pay off the national debt of approximately $28 trillion right now.



So long story short, you know, and again, I'm not here to in the in the purpose of this. This coffee with Brendon is not to talk about national debt and all the different things but what but just to pretty much point out that the United States, the United States and us and you know, all the folks, at the end of the day, this is a not a new thing, you know, all these different things that have happened have happened before. They might be a little bit different in how they manifest themselves, but the markets gone through a lot of trying times and we've come out okay, so that's my message today, volatility is normal. And as we've talked about prior coffees and burnin, you know, the public is not very good timing the market, you know, getting out of the market when things are bad and getting back into the market when things are low and you can buy things at a discount. So, for most of my clients, messages, stay invested. Don't get overly concerned about the ups and downs in the market. And for the most part, most people end up okay, so thanks for listening for today's coffee with Brennan. And I hope you have a great rest of the day.