Fix It Friday Ep. 22 - Fix It Friday - The Rearview Mirror Trap: Why Every Crisis Feels Like the Worst One

• Markets are inherently unpredictable, and the real challenge lies in mastering emotional resilience rather than prediction. Understanding that volatility is normal helps shift focus from trying to predict markets to building mental toughness, which creates more durable long-term strategies.
• Market corrections and crashes are part of the system and serve as opportunities for compounding. Viewing declines as part of the process rather than anomalies reduces fear and helps investors stick to their plans through turbulence.
• Media often dramatizes market movements, causing unnecessary panic. Distinguishing between media hype and factual context prevents reactive decisions that undermine wealth accumulation.

EP-22-CrazyWealthy-FIF

Disclaimer: [00:00:00] The following podcast by Fusion Family Wealth, LLC Fusion is intended for general information purposes only. No portion of the podcast serves as the receipt of or is a substitute for personalized investment advice from Fusion or any other investment professional of your choosing. Please see additional important disclosure at the end of this podcast.

A copy of Fusion's current written disclosure brochure discussing our advisory [00:00:15] services and fees is available upon request or at www.fusionfamilywealth.com.

Jonathan Blau: Welcome to another episode of the Fix It Friday edition of The Crazy Wealthy Podcast. Today I'm gonna talk about how the media responds. When the markets go lower.[00:00:30]

So what I call today's podcast is when markets go low, the media goes lower. If you've been paying attention to the headlines lately, you've probably heard things like the market plunged. This week, the DOW is in correction [00:00:45] territory. The s and p 500 has now declined for five straight weeks in a row. That language is designed to grab attention and more often than not to trigger emotion.

So today, let's fix it because what often gets lost in the noise is [00:01:00] how markets actually work and how long-term returns are really earned.

Voiceover: Welcome to The Crazy Wealthy Podcast with your host, Jonathan Blau. Whether you're just starting out [00:01:15] or are an experienced investor, join Jonathan as he seeks to illuminate and demystify the complexities of making consistently rational financial decisions. Under conditions of uncertainty, he'll chat with professionals from the advice [00:01:30] world, entrepreneurs, executives.

And more to share fresh perspectives on making sound decisions that maximize your wealth. And now here's your host.

Jonathan Blau: So the first concept I want to [00:01:45] introduce is that markets are not linear and never have been. One of the biggest misconceptions investors have is expecting markets to move smoothly, upward over time.

They don't, they never have. My bet is they likely [00:02:00] never will. Stock market returns are uneven, volatile, and lumpy, especially in the short run. That's not a flaw in the system. It's the cost of admission to getting stock returns, which after inflation for the last a hundred years have been [00:02:15] 7% a year, fully two and a half times the 3% a year after inflation return for bonds.

They don't come for free. The cost of admission is not in currency, it's emotional pain. Think back to early 2020 from February to [00:02:30] March as COVID shut the world down. The s and p fell 34% in 33 days, which was unprecedented. It felt catastrophic to every investor, and yet by the end of that very same year, the s and p [00:02:45] 500 having gone down 34% in a month.

Early in the year, finished up 16% or so for the year. Even if you invested right before the crash, same market, same year, completely [00:03:00] different experience depending on someone's time horizon. Why do headlines distort reality? We often hear headlines like The market is down 3% this week. This sounds dramatic until you zoom out, and this is where context matters from [00:03:15] 2023 through 2025.

S and P 500 was up approximately 26% in 2023, 25% in 2024 and 18% in 2025. [00:03:30] Most people instinctively will add those numbers together and say, okay, that's about 70%. But markets don't add. They compound. A $100 investment at the start of 2023 [00:03:45] didn't grow 70% to $170. It grew to nearly $187 by the end of 2025.

That's almost an 87% cumulative gain despite all of the scary [00:04:00] headlines along the way, and a roughly 20% decline in April, 2025, driven by tariff fears. That disconnect between how the market felt and what it delivered is exactly why behavior matters more than commentary. [00:04:15] Translating the media's favorite scary terms, this is important.

Let's demystify a few of the labels that the media loves to use, and let's translate them into plain English. The first phrase is correction territory. When you hear the [00:04:30] DOW is in correction territory, which I heard last week on CNBC. All that means is the index is down 10% from a recent high. It doesn't mean it's down 10% for the year.

It doesn't mean something [00:04:45] is broken and it doesn't predict what's going to happen next. It's just math. The Dow had reached a record closing high of about 50,188 on February 10th. On March 27th, it closed [00:05:00] around 45,166. That's roughly 10% below that recent high. That's it. Bear Market. Bear Market also has a specific definition.

It's a decline of 20% or more [00:05:15] from a recent high. Again, not for the year, but from the recent peak. Bear Markets are uncomfortable, but they're a normal part of long-term investing, not evidence that the system is failing. What about a 5% decline? There's no dramatic [00:05:30] term for that, but the media usually calls it a pullback.

I call it normal market behavior, which tells you something important. The language gets scarier long before the fundamentals do. What history actually shows. Since 1980, the stock market has [00:05:45] experienced an average intrayear decline of about 15% almost every single year, including years. That finished strongly positive.

Larger declines of about 30% or more tend to show up about one year in five or [00:06:00] six. Volatility isn't the exception. It's the rule, and the real risk isn't volatility. Volatility feels risky, but the real risk, the one that destroys wealth, is behavior selling after declines, waiting for [00:06:15] certainty or the dust to settle.

Abandoning long-term plans because the short-term fear feels overwhelming. That's how temporary market declines become permanent financial mistakes. So here's the takeaway for fix it Friday today, markets are not linear. [00:06:30] Short-term declines are normal. Market declines are frequent, sometimes steep, but historically, always temporary headlines are not Guidance and context matters for far more than commentary.

The goal [00:06:45] isn't to avoid volatility, it's to understand it well enough so that it doesn't hijack your decisions. Or your portfolio strategy that was carefully designed to meet your most important long-term goals. At Fusion Family Wealth, we believe the greatest long-term [00:07:00] risks aren't day-to-day market swings.

There are really two risks. The external risk, which is the loss of purchasing power from inflation, for those investors who have far too much of their money exposed to bonds and the internal risk, [00:07:15] the behavioral mistakes investors make when markets feel uncomfortable. Equities aren't owned because they're smooth, they're owned because over time they've been one of the most effective ways to compound wealth and outpace their biggest threat, which is inflation.

[00:07:30] Provided that investors can stay disciplined through the inevitable ups and downs, our role isn't to react to the next headline. It's to help clients stay invested, stay rational, and stay focused on long-term ownership of productive [00:07:45] businesses. That's today's Fix It Friday if you have friends. Who tend to get nervous during periods like this because of the terminology the media uses and the extrapolation of today's decline well into the future long after it likely will get [00:08:00] resolved.

Please feel free to share this podcast with them. You can access our podcast also on Crazy wealthy podcast.com, fusion family wealth.com, and all your favorite podcast venues. Thanks for listening.[00:08:15]

Voiceover: Thank you for tuning into another episode of The Crazy Wealthy Podcast. For more insights, resources, and to sign up for our newsletter. Visit Crazy Wealthy podcast.com. Until then, stay crazy wealthy.[00:08:30]

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