The last four days have been exhausting.

For a while there yesterday, we were headed for the worst three-day stretch in the stock market since 1987. Then we weren’t due to a rumor that Trump was rethinking his tariffs.

Then we were again after Trump declared he wasn’t.

Then we weren’t again by the closing bell.

But it was a nailbiter there until the end. It was rollercoaster ride for investors’ finances and emotions alike.

If U.S. indexes had, indeed, closed as badly as they seemed they would, I guess we would have had a new Black Monday on our hands. The last (and, as it turns out, only) one involved about $1.71 trillion wiped off the global markets due to widespread overvaluations and rising interest rates.

At the time, I was a senior in college, studying finance and learning how to invest. So I was somewhat insulated from the chaos of unprecedented margin calls and demands on the banking system.

But actual investors? Too many of them were panic-stricken, certain it was the end of their financial world.

It wasn’t, as it turned out though. It never is.

The market recovered after Black Monday when the Federal Reserve took swift action by slashing interest rates. It also encouraged banks to continue lending through the crisis and “affirmed its readiness to serve as a source of liquidity to support the economic and financial system,” in the words of then-Chair Greenspan.

 

And so the markets bounced back up again. They might not have recovered everything right away, but they did recover.

In fact, they went on to soar.

 

I’m here to tell you that the markets will recover again. It always does.

It’s only a matter of whether it will recover with you in a profitable position or at a loss.

Don’t Panic

It’s been 38 years since Black Monday, and a lot has obviously changed.

For me personally, I’m well passed my college days. I’m now a seasoned Wall Street writer with over 150,000 followers around the world. And I’ve witnessed multiple recessions and market crises, including:

  • Black Friday

  • The dot-com bubble bursting in 2000

  • The housing market crash in 2008, bringing on The Great Recession

  • The COVID-19 panic of 2020

None of them were fun going through, to say the least.

Source: Wide Moat Research

But guess what?

They passed.

If I sound insensitive, I apologize. I’m actually extremely concerned that people are losing money right now when they don’t have to be.

I understand why so many are scared, especially retirees who have sunk their hard-earned savings into dividend-paying stocks. They’ve seen their 401(k) shrink by 15% (the approximate decline for the S&P 500) or more due to President Trump’s retaliatory tariff war. And they don’t know how much further the market may fall still.

Everyone’s intrinsically afraid that this time is different because “this time” is now. It’s what we’re experiencing – and feeling – right this moment.

Worse yet, as opposed to Black Monday all those decades ago, the Internet’s global dominance has inspired a whole new paradigm for financial news to circulate. So instead of feeding off the emotions of a newspaper or two and our immediate circle of contacts…

We’re bombarded with story after story and social media post after social media post of people freaking out. This then gives us hundreds, thousands, and even millions more reasons to do the same.

It’s difficult to keep your heard on straight when everyone around you is screaming that the world has ended. But I’m going to urge you today to drown those noises out and listen to the voice of reason instead.

Don’t follow the herd. Stay away from the cliff.

Cooler heads really will prevail.

There Will Be Winners

The winners in all of this – and yes, there most definitely will be winners when everything is said and done– will be those investors, analysts, and businesses that can think long term.

In short, investors who hold onto quality stocks through thick and thin are almost certain to prevail.

For instance, most every company that Wide Moat Research recommends in our flagship service pays dividends. And since its inception in 2019, not one of these stocks has cut theirs.

Not even during the shutdowns.

If they continue that streak through this latest crisis – which I’m confident they will – that means their investors will still be paid on time. Just like always.

It will be exactly as we anticipated when we first recommended them.

That’s what we do here at Wide Moat Research. We focus on fundamental analysis to protect your portfolio even during times like this.

It boils down to the foundational understanding that, as Benjamin Graham, the founder of value investing, once said, “You are neither right nor wrong because the crowd disagrees with you. You are right because the data and reasoning are right.”

Both point to this being a temporary dip. Not the end of the world.

To quote my fellow Wide Moat analyst, Stephen Hester, from Friday:

Every crisis seems different on the surface. Different politician. Different decade. Different cause. But look one layer deeper, and it’s obvious: At its core, every crisis is the same.

The existential threat turns out to be a temporary problem.

Even now as I write this on Tuesday morning, the markets are rising. Smart investors are buying into the dip, knowing there are bargains to be had.

(In fact, stay tuned as my team and I continue to scour the markets for them.)

Too many others are sitting out on the sidelines, fearful that this upturn is merely a blip. And, who knows. It might be. There is always that chance.

But one way or the other, there’s no need to panic. Assess each holding that you have for what it is, what it has done, and what it can do.

Then act accordingly.

You don’t have to fear Black Mondays or any other kind of downturn. Commit to being a long-term investor and make the most of a market that always eventually goes up again.

Regards,

Brad Thomas
Editor, Wide Moat Daily

MAILBAG

What other lessons have you learned through a volatile market? Write us at [email protected].