In the face of turmoil, the voice of reason is many times muffled as it is surrounded by the manic cries of panic. Unfortunately, mania makes better headlines than reason. We'd like to give some perspective to the current crisis and market reactions.

Market Crisis?

Some of you who have talked to us this year know that even void of the earthquake and tsunami crisis in Japan, we would not have been surprised to have the markets give up some of its gains...similar to what it did about a year ago when the market declined 10% before continuing the solid bull market that began two years ago. 

The natural disasters in Japan gave embodiment to a reason for that "correction" to occur.  That's not to say that we knew the markets were overvalued or that they were overvalued; however we expect market declines even during solid bull markets.  Since their highs at the end of February, the markets (both measured by the S&P 500 and the Russell 2000) have declined approx. 5%. 

Equity markets remain uncertain on news from Japan about earthquake devastation and related nuclear risk. Japan is significant, representing approximately 9% of the world market capitalization.  While it will undoubtedly take time for the true impact of this disaster to become fully known, it's our job to help you remain calm and objective. Historically, following an initial period of uncertainty and weakness, equity markets have typically recovered after disasters such as Pearl Harbor, the 1995 earthquake in Kobe, Japan and high-impact hurricanes such as Katrina.

As long-term investors, these are moments when it's worth considering adding to your investments.  This is what it feels like to invest when markets are low (at least lower than when you were comfortable with the market as it was rising).  If you recall, we mentioned at the end of 2008 and early 2009 that we believed that moment in time would likely be one of the best buying opportunities in our lifetime.  Those that invested when the market was bleakest have since been rewarded with over 100% returns on their investment.  We're not saying we think this is the next best buying opportunity of our lifetime, but we are reminding you that investing is a long-term activity.  In that life-cycle, the markets will go up and they will go down.  You should expect it and at best, embrace it by adding to your portfolio during times when it just doesn't feel right.  Buying low will mean buying when many people are selling and the news is...well...mania.