If there’s one thing history has taught us, it’s that markets don’t move in a straight line. Short-term declines, while often unsettling, are a normal and expected part of investing. The key is remembering that these pullbacks are temporary, while long-term growth is what ultimately drives wealth creation.

*https://www.carsongroup.com/insights/blog/stocks-can-go-down/

What the Chart Tells Us

This chart gives us two important perspectives on market behavior:

• Annual Returns (Bar Graph): These bars represent the yearly performance of the S&P 500. While some years are more volatile than others, the long-term trend is overwhelmingly positive.

• Max Drawdowns (Diamonds): These diamonds highlight the largest market declines within each year. Even in years where the market finished strong, there were periods of temporary setbacks.

For example, in 2023, the S&P 500 returned approximately 26%, but along the way, it experienced a 10% decline. Similarly, in 2020, the market fell almost 35%, yet those who stayed invested saw a total return of 18% by year-end. These numbers illustrate an important lesson: even strong years have their bumps, but the key to success is staying invested.

Why Pullbacks Are Normal

Market pullbacks are a natural response to shifting economic conditions, changes in interest rates, political events, and investor sentiment. These fluctuations, while sometimes uncomfortable, are temporary. Over time, the market has demonstrated a clear upward trajectory.

Looking at the data, the average intra-year decline for the S&P 500 has been -14.2%, yet the average annual return is +12%.( https://www.officialdata.org/) This reinforces that momentary downturns don’t dictate long-term results. The biggest mistake investors make is reacting emotionally—selling out of fear when markets dip, often missing the recovery that follows.

The Role of Market Pullbacks in Long-Term Investing

Rather than fearing pullbacks, it helps to understand their purpose:

• Healthy Market Corrections: Markets need occasional declines to prevent overheating. These moments create more sustainable pricing and long-term stability.
• Opportunities to Invest: Pullbacks present chances to buy high-quality investments at lower prices. Long-term investors can use these dips to add to their portfolios at a discount.
• Portfolio Resilience: These downturns highlight the importance of diversification and proper asset allocation, helping investors build a more stable financial foundation.
• Strengthening Emotional Discipline: Learning to navigate volatility without panic is key to long-term success. Markets reward patience and discipline over time.

At Lockwood Financial Strategies, we believe one of our most valuable roles as advisors is to keep our clients on track, ensuring that short-term market movements don’t derail long-term financial plans. Think of investing like driving a long journey—you may hit some heavy traffic or bad weather, but by staying focused and avoiding rash decisions, you’ll reach your destination.

If you have any concerns about the market or your portfolio, I encourage you to reach out. We’re here to guide you through every market cycle, ensuring your strategy remains aligned with your long-term goals.

Best regards,
Philip Lockwood

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It is not possible to invest directly in an index. Past market performance is no guarantee of future investment performance or success. Asset allocation
(and/or diversification) does not ensure a profit or guarantee against loss; it is a method used to help manage risk.

Philip Lockwood | Founder + Managing Partner

Address: 1501 Ingersoll Ave. Suite 201 Des Moines, IA 50309 Phone: 515-274-8006

Email: Plockwood@parklandrep.com Website: Lockwood Financial Strategies   Securities offered through Parkland Securities, LLC, member FINRA (FINRA.org) and SIPC (SIPC.org). Investment Advisory services offered through SPC, a Registered Investment Advisor. Lockwood Financial Strategies, LLC is independent of Parkland Securities, LLC and SPC   Securities offered through Parkland Securities, LLC, member FINRA/SIPC.