A woman wearing a protective mask walks past the New York Stock Exchange on March 12, 2020 in New York City.
Pablo Monsalve | VIEWpress | Corbis via Getty Images
Two years ago, on March 16, 2020, stock markets suffered a one-day 12% drop.
From Feb. 19 to March 23 of that year, when the S&P 500 Index finally hit bottom, it lost about 34% of its value.
Yet for retail investors, new lessons on investing were just beginning as the market underwent an historic rebound.
The aftermath of the onset of the Covid-19 pandemic prompted a dramatic loss of income for many households.
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For others, it created an opportunity to save more amid unprecedented stay-at-home rules and government stimulus checks.
Research suggests 10% to 15% of those one-time government payments were invested in the stock market.
“Betting on stocks was one of the few things you could continue to do,” said Dan Egan, vice president of behavioral finance and investing at Betterment.
That set the stage for the rise of so-called meme stocks that saw their stock prices soar.
Two years later, those stocks, and investor expectations, have mostly come back to earth.
Yet inflation has spiked. Morningstar predicts prices will continue to run hot for the next couple of months, and potentially moderate in the second half of the year.
Meanwhile, concerns about the Russia-Ukraine war are expected to continue to whipsaw the markets in the short term. There are some tried and true lessons investors may apply today.
‘There is no safer time’
Headlines about the Russia-Ukraine conflict may give investors pause as to whether now is the time to put their money in.
“Should you defer investing for a safer period?” Egan said. “The answer is no. There is no safer time.”
You should feel that sense of market risk.
vice president of behavioral finance and investing at Betterment
One thing that may help calm investors’ jitters is that today’s risks are relatively well known. We have been through gas and oil supply shocks before, Egan said. What’s more, the Federal Reserve has greater policy levers at its disposal.
Conversely, the scariest market Egan said he’s experienced was in 2017, when the market went straight up and didn’t even experience a 5% drop over the course of the year.