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Podcast Show Notes – The Architecture of Wealth

Date: 5/8/2022

Name of podcast: The Architecture of Wealth

Episode title: -14% Has Never Felt So Bad

Inflation. The stock market. Ukraine. The Timberwolves bounced from the 1st round of the playoffs. These are scary times. But spring is finally here in Minnesota, and Mark hopes to provide a little sunshine in this gloomy stock-market storm. The average market drawdown in any given year is 14%. So for 2022, we are average. So why do things seem so bad?

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Since 1980 – for the past 40 years – the average drawdown has been 14%. And only rarely do the markets finish down that much. Quite often, the markets finish up. 

While the S&P 500 drawdown to date is 13.6% – which is close to the average – the market seems worse than it is so far this year for a few reasons:

  • Inflation is out of control- by US standards. 
  • We’re just coming out of Covid. We may still be in a little bit of shock, and we’re hoping things will improve. 
  • High-growth stocks have been badly crushed.
  • Vocal YouTubers, Reddit folks, and novice investors concentrated in Growth names have had larger than average losses and have been very vocal about it.
  • Drawdowns are natural and normal. It’s only concerning when the market gets down by more 20%-25%. With inflation, there is concern about a possible recession. Rising interest rates coupled with the unusual selling off of the bond market threw people off (Normally, bond funds are risk diversifiers but also give investors capital appreciation over the last 10-20 years).

Despite everything else, a 14% drawdown is normal and average. The market most often comes back. In most cases, the market finishes the year up, sometimes substantially up. 

People who are still working, especially younger people, will want the chance to buy in on these dips. They will be better off investing during these natural drawdowns. Even people in their forties or fifties can benefit because they won’t access these assets for 30 years or more. 

While everyone gets nervous during these times, investors can trust that buying in diversified mutual funds or ETFs will pay off over the long term as long as they maintain a strong emergency fund and even a vague notion of a financial plan. 


0:00 History of drawdowns

1:17 Current drawdown rate right at average 14%

1:31 Reasons it feels worse

2:35 Bond market & possibility of a recession

3:28 Good time for those still working & for those in their thirties

4:28 Good time for those in their forties & fifties, as well

4:42 Emergency fund & long-term plan

Mark Struthers 

Chanhassen, MN 55317

The Architecture of Wealth Podcast is for educational purposes only. Investment Advisory Services are offered through Sona Financial LLC (DBA Sona Wealth and Sona Wealth Management), a registered investment adviser authorized to do business in states where registered or otherwise exempt from registration. Nothing discussed during this show/episode should be viewed as investment advice. If you have questions pertaining to your specific situation, please consult your own financial professional.

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