Expectations in the Market

Imagine someone embarking on their very first ocean cruise. They’ve booked a spot on one of the large ships that circle the Caribbean, expecting nothing but sunshine, calm seas, and postcard-perfect days. Those expectations aren’t accidental. They’ve been shaped almost entirely by glossy images and videos on the cruise company’s website and social media feeds. Naturally, you won’t find footage of wind-driven rain sweeping across the sun deck or choppy seas that make the ship noticeably sway as you walk down the hall.

 

Now imagine how this first-time cruiser feels when the ship passes through a minor squall. Because rough weather was never part of the picture in their mind, a few hours of dark skies and rolling waves may feel alarming—maybe even like something has gone terribly wrong.

 

Contrast that with an experienced passenger. They know that occasional rough seas are simply part of ocean travel. When the weather turns, they put on a motion-sickness patch, head below deck, and enjoy everything the ship still has to offer—confident that calmer conditions are ahead.

 

Expectations play a powerful role in how we experience less-than-ideal situations. The same principle applies to investing. How you expect the stock market to behave largely determines how you react when volatility shows up. If you’ve been led to believe that “smart” investments are supposed to move steadily upward, then any downturn can feel like a sign of failure—prompting panic and a rush to sell. But if you expect long-term growth to be interrupted by periodic declines, you’re far less likely to react emotionally or take impulsive action when prices dip.

 

And dips are far more common than headlines suggest. We live in an era where a 2% drop in a major index can trigger red-letter alerts and dire predictions in our news feeds. Yet history tells a different story. Since the early 1950s, the S&P 500 has experienced declines of 5% or more in roughly 92% of calendar years. In more than half of those years, the market has endured corrections of 10% or greater.

 

Still, despite those frequent setbacks, the S&P 500 has delivered an average annual return of more than 10% over that same time period. Volatility hasn’t prevented long-term growth—it’s been part of the journey.

 

No one enjoys rough seas, whether in the market or on a cruise ship. But being prepared ahead of time—and remembering that “this too shall pass”—can greatly reduce anxiety and the temptation to second-guess your plan at exactly the wrong moment. That’s why, when building your long-term strategy, your advisors incorporate diversification designed to help stabilize your portfolio during significant market corrections, along with the flexibility to make adjustments that keep your risk exposure aligned with your goals.

 

Just as importantly, your advisor is there to talk with you during volatile periods to help put events in perspective, ease concerns, and keep you focused on long-term success. If questions or worries arise, reach out before making any major decisions. Staying on course is often the most important action of all.

 

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