The stock market rollercoaster continues. News and rumors are dominating the discussion, and no one seems to know what to really believe.
In today’s blog, I wanted to take a bigger look at lessons to learn as investors, especially in today’s volatile times.
Volatility Happens
Even the best years have some bad days. Last year is a perfect example, as we had a near-bear market (down close to 20%) after Liberation Day, yet stocks soared back to new highs, and it was another good year for the bulls.
We all want to gain 20% a year forever, but that isn’t possible, and to see the solid returns that stocks can provide in the long run, you have to be able to withstand the inevitable volatility and bad times.
Earnings Drive Long-Term Stock Gains
Lesson two is that earnings and profit margins matter a lot.
We all get it, the headlines are quite bad, and confusion reigns. But as of now, I do not see a pending recession in the US, and by the end of 2026, it should be another solid year for investors. Even though the headlines are scary, it doesn’t mean we should ignore good news when it’s there.
The Negative Sentiment Is Building, and That’s a Good Thing
Lesson three is sentiment matters.
Yes, the S&P 500 was recently about 7% off the late January highs, but if you saw some of the sentiment indicators, you would think it’s much worse. That’s a good thing. Often, the more extreme the emotion, the greater the benefit of being contrarian. But greater fear means more bad news is likely already priced into the market, making an upside surprise more likely.
Corrections And Bear Markets Happen
Lesson four is corrections, and bear markets happen.
The S&P 500 moved into a 5% mild pullback last week. The big question now is, could it get worse?
Of course, if the situation in the Middle East gets worse, then the selloff could absolutely get worse. But with so many anticipating the worst and expecting another bear market right around the corner, it is important to put into context that the most likely scenario is that stocks don’t go into a bear market.
Putting 2026 Into Perspective
The final lesson to always remember is that most years have scary pullbacks, yet when all is said and done, the full year usually does just fine. Last year, for instance, saw stocks down 15% for the year in early April, and pure panic was in the air, yet in the end, stocks still gained close to 17%.
One thing you can do yourself a big favor is by expecting stocks to see a double-digit correction each year. If it doesn’t happen, that’s great. But if it does? You are better prepared for it.
There is a good chance that in each of those years when stocks were down at least double digits, the overall feeling was one of worry. They say the stock market is the only place that things go on sale and everyone runs out of the store screaming, and I agree. When you look at it this way, you can plan for weakness and volatility and use them to your advantage.
In conclusion, the headlines and volatility aren’t fun for anyone, but it is all part of longer-term investing. I remain optimistic that this too shall pass, and investors will be rewarded once again for sticking to their investment plans.
Happy investing…
Busy And Useful 