Investing in the Face of Uncertainty

By Daniel Campbell, CFA

Buckingham Wealth Partners


The stock market seems to be unstoppable
lately. Inflation registered at a 13-year high
for the second month in a row, and then the
S&P 500 broke its own record within a week.1

New variants of COVID-19 threaten to slow
global re-openings. Unemployment and labor
participation have yet to recover to their
February 2020 levels.2 Yet the U.S. stock market
is more than 35% higher than its pre-COVID
high.3 All this begs the question – what could
possibly bring stocks down?
We believe stock markets are efficient at
incorporating all known current information;
in 2020, an average of $650 billion traded
hands through global stock exchanges every
4 With that many people expressing a view
on different stocks, prices are usually a fair
representation of current value. However, we
also know that investors can get optimistic
about the future. The more optimistic they
become, the higher stock prices go and the
more likely a little bit of bad news can cause
a big sell-off. Those sell-offs are scary in the
moment, but the feelings they create are also
easy to forget. For instance, many people have
forgotten the day in March last year when the
stock market fell over 12%!
We expect stocks to lose money in one out of
every three months. We expect stocks to be
down something like once every six years. And
we expect a correction of 20% or more once
every 10 years. Think about this: $1 million
hypothetically invested in U.S. stocks 30 years
ago would have grown to over $22 million
by the end of 2020. But along the way that
investment’s value would have hit a high and
then dropped by double digits seven times,
including getting cut in half in 2008.7 As we
can see in the graph, some of those declines
happened fast and the recovery was quick –
like 2020. But others were drawn out and the
portfolio didn’t recover to its previous high for over five years.

The truth is, we don’t know what will cause
the next big sell-off in the market. Investing is
a game of odds, and we design portfolios to
put the odds on your side. The longer you stay
invested, the more those odds tilt to your favor.
Because we don’t know where the next shock
will come from (and we don’t believe anyone
else does either), we built your portfolio to
endure a variety of risks. The next panic could
be from a major international event, or it could
spring from a seemingly small piece of data that
causes investors to rethink their assumptions.
Whatever causes the next scare, knowing
history can help. Remember, the path toward
portfolio growth has often been littered with
double-digit declines. If you found yourself
losing sleep over your portfolio’s performance
throughout the first half of 2020, consider
taking some risk off the table. We balance
your stock risk with high-quality bonds so that
your personal experience in the market isn’t
more than you can endure. Make sure that
your portfolio strikes the right balance of risk
and reward, because ultimately it will be your
decision to stick with your plan through the
rough patches that will determine its success.


This article is for informational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third party data which may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness
cannot be guaranteed. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual
portfolio nor do indices represent results of actual trading. Total return includes reinvestment of dividends and capital gains. Performance is historical and does not
guarantee future results. The chart is illustrating a hypothetical investment of $1 million in the U.S. stock market for 30 years ending December 2020. The U.S stock market
is being measured by the Russell 3000 Total Return Index. IRN-21-2606