The past three years have been good ones for investors. Portfolios have recovered strongly post-2022, markets have reached new highs and many plans feel comfortably on track. Of course that’s welcome news, but strong periods like this are also when expectations quietly drift higher, often without us realizing it.
This is where long-term perspective matters.
We know markets don’t move in straight lines. Over long periods, returns tend to settle around historical norms, but the path to get there is uneven. Strong years are often followed by quieter stretches and, at times, sharp but temporary declines along the way. This isn’t a flaw in the system. It’s why and how markets work.
A great reminder comes from Morgan Housel at The Collab Fund1. The idea is simple: progress happens slowly and quietly, while setbacks arrive quickly and demand attention.
“Tell someone that everything will be great and they’re likely to either shrug you off or offer a skeptical eye. Tell someone they’re in danger and you have their undivided attention.” Gains compound in the background. Losses show up suddenly, dominate headlines and stir emotion. That imbalance can make the experience feel more stressful than the long-term results show.
This is also why averages can be misleading. Ben Carlson frequently uses market history to show that the average is not what happens most of the time. Looking at long-term data only a small handful of calendar years actually deliver returns close to the average. He points out that most years finish well above or well below it.
“Over the past 100 years or so the U.S. stock market has only ever experienced returns in the 8% to 12% range five times. Roughly half of all years since 1928 have seen double-digit losses (12 times) or 20%+ gains (35 times) for the S&P 500. Two-thirds of the time stocks finish negative or up 20% or greater.”2
Our message heading into a new year:
When markets reach new highs it’s easy to anchor expectations there and assume those levels are a new baseline. When markets inevitably cool off or decline that’s often when emotional decisions creep in.
Remember, our focus is not on chasing market highs or capturing every strong year. We’re focused on earning the returns your plan actually needs over time, while preparing you in advance for those periods.
As Nick Murray has long emphasized, the real test for investors doesn’t come during good markets. It comes during the uncomfortable ones. They aren’t surprises. They’re expected.
By setting realistic expectations and planning for tougher stretches ahead of time our goal is to help you sit through them calmly when they arrive, rather than react in the moment. That discipline is what keeps long-term plans on track.
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