Ameriprise Financial, Inc.

New York Stock Exchange
Back to all articles
Neutral 0

When Stock Markets Get Shaken, It Can Pay for Investors to Be Patient

AI-generated analysis

📉 The S&P 500 is down only 4.4% from its January all-time high but feels worse due to extreme short-term volatility.

🌍 Geopolitical tensions in the Iran war, specifically blocking traffic in the Strait of Hormuz, are spiking oil prices toward $120 per barrel.

⚠️ Sustained high oil prices could lead to stagflation, a scenario where economic growth stagnates while inflation remains high.

📈 Historically, the S&P 500 has recovered from every major crisis, including global wars and trade conflicts, to reach new records.

💡 Experts like Anthony Saglimbene advise that extreme volatility often provides solid long-term entry points for buying stocks rather than selling.

⏳ Recoveries can take years, so moving retirement savings out of stocks risks missing subsequent gains during the rebound.

📱 Modern trading apps have attracted younger investors who may not be accustomed to wild market swings but have time on their side.

⏰ Younger investors with decades until retirement can treat price drops like sales and ride out market waves for compounding growth.

🛡 Older investors and retirees face less time for recovery, so they should consider cutting spending or withdrawals after downturns.

💸 Selling stocks in a 401(k) during a drop incurs taxes and potential early-withdrawal penalties while removing future growth potential.

📉 Professional investors define annual drops of at least 10% as "corrections," which they often view as culling excessive market optimism.

🔒 Emergency funds and money needed for home repairs or medical bills should not be invested in the stock market.

🤝 Defined-benefit pensions offer an alternative path, though few U.S. workers currently hold these plans.

📉 The Dow Jones Industrial Average has plunged roughly 900 points multiple times since the start of the Iran war only to recover later in the day.

🏦 The Federal Reserve and central banks lack effective tools to fix stagflation once it occurs.

⚠️ Staying calm and patient is often the best strategy historically when stock markets are falling or feeling shaky.

Bullish Signals
  • The S&P 500 is only 4.4% below its all-time high set in January, demonstrating strong underlying resilience despite recent volatility.
  • Historically, the S&P 500 has always recouped its losses from steep drops to push toward new records after major events like global financial crises, trade wars, and military conflicts.
  • Anthony Saglimbene, chief market strategist at Ameriprise, notes that extreme volatility often provides investors with a solid long-term entry point to buy stocks rather than sell.
  • Younger investors have the gift of time, allowing their portfolios to recover before compounding and growing even bigger over decades until retirement.
  • Some of the best days in U.S. stock market history have been clustered among downturns, offering significant upside potential for patient investors.
  • Apps on smartphones have made trading easier and cheaper than ever, helping draw in a new generation of investors to potentially benefit from market recoveries.
Risk Factors
  • Extreme volatility in oil prices could push global economy into stagflation, a scenario with no good tools for central banks to fix.
  • Oil prices spiked to nearly $120 per barrel and could quickly reach $150 if the Strait of Hormuz remains closed due to Iran war traffic halt.
  • S&P 500 is only 4.4% below its all-time high, feeling worse due to sharp hourly and daily price swings caused by market instability.
  • Dow Jones Industrial Average has plunged roughly 900 points in the morning several times recently, erasing losses later in the day.
  • S&P 500 experiences declines of at least 10% every year or so known as corrections, culling optimism that could drive prices too high.
  • Selling stocks or moving 401(k) investments into bonds to avoid drops means missing future recovery and gains if timing the market is difficult.
  • For those raiding 401(k) accounts now, selling stocks triggers taxes and possible 10% early-withdrawal penalty, plus removes chance of recovery.
  • Older investors have less time than younger ones for investments to bounce back after market downturns.
  • People who have to withdraw from their investments during retirement remove potential compounding ability needed for investments to last 30 years or more.
Full Analysis
When stock markets experience sharp volatility, such as the recent turmoil driven by geopolitical tensions like the war in Iran, investors are often urged to exercise patience rather than reacting impulsively. The S&P 500 currently stands at 4.4% below its all-time high set in January, with the Dow Jones Industrial Average frequently plunging roughly 900 points in the morning only to erase those losses later in the trading day. Anthony Saglimbene, chief market strategist at Ameriprise, notes that while extreme volatility feels uncomfortable and may cause near-term drawdowns, it often creates solid long-term entry points for buying stocks rather than selling them. Historically, whether during a global financial crisis, trade wars, or military conflicts like the fighting off Iran’s Strait of Hormuz—where traffic has halted most flows causing oil prices to spike to nearly $120 per barrel—the U.S. stock market has recovered from every steep drop to push toward new records, though these recoveries can take years. Concerns about a potential shift toward stagflation loom as storage tanks fill up due to reduced oil flow and producers consider cutting output, which could push prices toward $150 per barrel if the strait remains closed. Economists define this scenario as stagnant growth with high inflation, presenting a challenge for central banks that have few tools to address such a combination effectively. Although apps have made trading cheaper and easier for younger investors who have decades until retirement allowing them to ride out market swings like sales, older investors face more immediate risks. Professional strategists consistently advise keeping money needed within several years or up to a decade, potentially 30, outside of stock portfolios in bonds or other stable assets rather than investing emergency funds that might be needed for home repairs or medical bills. Moving investments out of stocks into safer alternatives can reduce exposure to sudden drops but risks missing out on significant long-term gains and recovery periods. Timing the market is notoriously difficult, with some of the best days in U.S. stock market history clustered around downturns, yet many investors lack the time for portfolios to bounce back before retirement needs are met. If investors must withdraw cash from a 401(k) due to financial pressure, they risk paying taxes and potentially a 10% early-withdrawal penalty while also forfeiting future compounding opportunities as those investments cannot recover their losses while sitting in cash. While some retired individuals may choose to reduce spending after sharp downturns, defined-benefit pensions remain the ideal safety net for many workers, though few still hold them today as they provide a steady income stream independent of market fluctuations.