This Time is Different
I received an email from a client last week. I’ll paraphrase, but it basically said, “Adam, I’m VERY nervous about the current environment and I’d like to discuss getting out of the stock market.”
First things first…. I love getting this email.
Let me clarify….I don’t love choppy markets where people are worried, but I know how many hours, days, or weeks a nervous investor may be sitting on some kind of draft of an email like this before finally hitting send. The longer that email stays in draft format, the more the stress piles on. Feeling worried is normal — being stressed for an extended period of time, perhaps unnecessarily, shouldn’t be. It’s our job to try to be the release valve.
(So, if you have one like this, just hit send and let’s chat.)
Okay, back to the client…
I know this client well. I know her current financial reality, her desired future, her preferences, and her capacity to take risk.
And she also knows me well too…After all, we’ve been through a few crashes and a bunch of life events together already.
Since she knows me, she knows I was likely to respond with the same old stories to try to keep her on course despite her fears.
Stories like:
“I understand you are concerned, unfortunately these declines are incredibly normal. After all, historically, declines in the S&P 500 occur with the following approximate frequency:
5% pullbacks: About 3–4 times per year on average.
10% corrections: About once per year (every 12–16 months).
20% bear markets: About once every 3.5 years.”
Or…
“In the late 1990s, the internet revolution led many to believe that traditional valuation metrics no longer applied. The early 2000s housing boom made real estate seem like an unshakable asset class. In early 2020, when COVID-19 upended the global economy, some questioned whether markets would ever recover, and two years later we saw the worst year ever (2022) for the bond market as inflation rose to a four-decade high….Or even just consider the last time President Trump was in office. There was similar chaos, confusion, and Tariffs (I wrote about this a few weeks ago here).
In each of these environments markets were resilient and the fundamentals of market cycles held true: irrational exuberance led to greed, fear led to selloffs, and disciplined investors who stuck to their strategies ultimately prevailed. So, while today’s challenges may seem unprecedented, history suggests that markets have a way of adapting and rewarding those who remain cool-headed.”
Or one more….
“We all know how compounding is the greatest tool for building wealth through investment returns, right? If a hypothetical investor stayed fully invested in the S&P 500 from 1993-2023, they would have earned an average return of around 10% per year.
But…
…If they miss the best 10 days: Reduces returns significantly (often cutting them in half).
…If they miss the best 20 days Reduces returns to near short term treasury rates.
…If they miss the best 30 days: Turns what could have been a strong investment return into a loss when comparing with inflation.
Here’s the scoreboard for a $100,000 investment in the S&P 500 from 2000 to 2024:
Fully Invested: ~$640,000
Missing the Best 10 Days: ~$292,000 (less than half)
Missing the Best 20 Days: ~$181,000
Missing the Best 30 Days: ~$115,000 (losing money compared to inflation)
Unfortunately, good and bad days are often clustered next to one another and there’s not a reliable way to avoid the bad ones while participating in the good.
*For illustrative purposes only. Past performance not indicative of future results. You cannot invest directly in an index.
Despite the litany of “different” market conditions to warrant justified panic, the market has been resilient.
This client knows my response ahead of time and still sent the email. Again, I love these emails.
…I didn’t reply with the usual stories.
…I didn’t offer a solution.
Instead, as pressure had built up over a few weeks or months of feeling uneasy, my job is simply that of a release valve.
And when the pressure is removed, then we revisit strategy. This is a much more effective headspace for decision-making.
And then, I offered some brand new stories.
Without further ado, here are three different narratives to honor why this time is indeed "different.
Story #1: Think of the Motivations of People at the Top
As of early 2025, estimates of Donald Trump's net worth vary, with figures ranging from approximately $4.6 billion to $8 billion, depending on the source and valuation methods. This wealth is derived from a diverse portfolio of assets spanning real estate, media ventures, golf courses, digital assets, and other business endeavors.
Elon Musk, on the other hand, has a net worth of approximately ~$429 Billion. Almost completely comprised of company stock:
Tesla Inc.: ~$160 billion
SpaceX: ~$147 billion (Constitution US+1Elon Musk Wealth Tracker+1)
X Corp: ~$33 billion (Reuters.com) X Corp, formerly Twitter, was recently bought by xAI, Musk’s AI company)
xAI: ~$80 billion (Reuters.com)
The Boring Company: ~$4 billion
Neuralink: ~$5 billion (thorntonsbudgens.com)
Other Investments and Assets: ~$4 billion
Whatever you believe, it’s hard to imagine a situation where these two would want to destroy their personal net worth and the accompanying power.
I’ve seen some commentators point to a possible self-interested strategy being “Step 1: crash the economy. Step 2: scoop up cheap assets.”
It’s worth pointing out that these two individuals are conspicuously low on cash and cash equivalents to be able to pull something off like this.
The great opportunist, Warren Buffett, is sitting on a record cash pile as I write this (link). Why would the billionaire leaders in charge of policy not be doing the same if they were equally as self-interested?
Story #2: Who Are You Selling To?
I find it super helpful to think of every transaction through the eyes of the other side. Example:
Adam wants to sell a piece of land at the corner of an intersection.
10 minutes after listing the property, an eager buyer calls offering full price, wanting to close quickly.
When this happens, your initial thought is what do they know about this land that I don’t, right?
When you dump your stocks, think about the buyer.
…What do they know that I don’t?
…Are they just dumb? Am I the dumb one?
…Are they more disciplined than I am?
…Do they have more time on their side?
…More risk tolerance? etc.
Answer these questions before you hit the sell button.
Story #3: When You Sell Stocks You’re Buying Dollars
I’ll often have a conversation about stock market volatility with a client and we’ll agree that tariffs are often inflationary.
Yet, the knee jerk reaction is to want to dump stocks and rush to cash.
If tariffs are causing dollars to buy less stuff, why are we considering exchanging our stocks for more of those dollars?
Or perhaps the plan is to swap stocks for US Treasuries, which can be similarly impacted by inflation.
Instead, I want you to think about an employee at a company.
Think about their kids. Their mortgage payments. The new baseball glove their son wants. The $9 cage free eggs their daughter likes to eat for breakfast.
This employee is reacting to changing prices due to inflation. They’re reacting to new needs and wants in their family. And they’re motivated to show up to work to sell stuff to boost profitability to get paid more of those dollars even as they diminish in value.
Extrapolate this one example across millions of market participants working within the economy.
If we acknowledge how their reasonable self-interest presents a powerful force I’d rather not bet against, investing in stocks can become easier as we deal with macroeconomic uncertainty.
Conclusion
I know a guy who will hold Apple stock through every up and down. When I asked him how he does it he simply pulled out his phone and said “Did you see this? When the stock price is crashing I pull this miracle of modern technology out of my pocket and I realize the company will be fine.”
I don’t advocate for individual stocks (I like ETFs and mutual funds), but this kind of story this investor tells himself is an essential ingredient for staying in the game during difficult markets.
My job is to weave a narrative to help inspire similar commitment to a more empirically robust, diversified investment strategy. We’ll keep shooting for that.
That’s all for today,
Onward.
Adam Harding
www.hardingwealth.com
