The Earth, the Moon, and the Markets

​"Earth Rising" - NASA Apollo program

Just seventy years ago no human being had ever seen the entire Earth in one picture; or more accurately, no one had seen the entire "disk" of the Earth in one picture.

The space race during the 1960's between the United States and the former Soviet Union helped propel both countries to achieve many prodigious firsts: the first person in space, the first person to orbit the earth, the first person to spacewalk, and the first men to walk on the Moon. These are some of the most impressive scientific achievements humankind has ever accomplished, and all of this was done in a little over a ten year period (1958-1969).

During this time, we captured pictures of the entire Earth for the first time. We were able to see our home from a vantage completely unimaginable by our ancestors. What do you think Christopher Columbus, Ferdinand Magellan, Zheng He, and other explorers would have thought if they were alive to witness this?

While we have known for hundreds, if not thousands of years that the earth was spherical, we had never actually seen the Earth from a perspective from far enough away to see it in its entirety.

​Want to change your thoughts?

​Try changing your perspective.

Most would agree that pushing forward and leaning into our lives is a great way to accomplish many of our goals and living our lives on purpose. While I completely agree with this, I would add, that it can be equally beneficial to step back from time to time to gain a different perspective on where you are, where you want to be, and how to get there. 

In at least one way, successful investing is similar, having the proper perspective can change quite a few things. It can change how you view investing, how you view current events, and even how you view yourself.

In the simplest terms, the market takes two step forward and one step back on a regular basis. Although the 2 to 1 ratio varies, sometimes it's 1 step forward and 2 steps back in the short run. But it's the long run where wealth is created. 

Let's look take a look at a 1-year, 10-year, and 90-year chart. The three charts below are called "Percent Off High" charts, which means it only shows the drawdowns in the market. Every time the graph is at the top of the chart it's making a new high, when it come down it's showing a drop from a recent high.  

Over the last year (see 1-year chart below), the Dow Jones Industrial Average has been down multiple times.

​If we look back over the last 10-years (chart below), it's difficult to count how many times the market has bounced around. Being down from a recent high is quite normal. In fact, most of the time the stock market is in a drawdown. 

​Stepping back even further, from 1930 to today its hard to even see our current drawdown on the far right hand side of the chart. However, what does stand out is the Great Depression and several other recessions (grey columns).

So what do these three charts reveal to us?

They tell us it's very common to have periods where the market is down. In fact, most of the time the market isn't at an all-time high, but rather in some type of drawdown. They also tell us the stock market (and many other markets for that matter) exhibit a fair amount of cyclicality, somewhat analogous to the regularity of the moon's orbit around the Earth.  

So the next time you are feeling uneasy about the stock market, your retirement portfolio, or just about anything else, take a step back. Take a big step back, and try to see the situation from a different perspective to decide if what you are experiencing is consistent with historical patterns. From this new vantage point you can determine the best course of action.


-Paul R. Rossi, CFA


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