“This time is different….” Known to many as the four most dangerous words in investing.
During the dot com bubble of the late 1990s, these words were uttered by those justifying nose-bleed valuations for companies worth billions on paper but with no revenue (not no profits, no actual sales). The thinking was, ‘eyeballs are all that matter – it’s different this time.’
Of course, it was not different that time, and eventually the companies without real revenue and profits saw their stock prices plummet, and, in many cases, the firms went belly up.
A similar situation happened during the SPAC debacle of the early 2020s. There were countless examples of how this structure was going to be different. One that got notable attention was the so called ‘Shaq SPAC’ with Shaquille O’Neal leading the way. Shares peaked around $15 and subsequently plummeted along with many SPAC company stock prices throughout 2023 and 2024.
These are classic examples where investors thought things would be different this time around – that a given company stock price would somehow defy gravity based on a new technology or financial structure. But of course, company fundamentals always matter (eventually), and regardless of how something is packaged, if basic, fundamental characteristics like revenue growth, strong balance sheets, profit margins etc. are not part of the long-term equation, then the results will be predictably bad.
But the idea that “this time is different” is often misapplied. For example, the cause of a market decline is often unique case by case. The pandemic was not the financial crisis was not the tariff tantrum was not the war in Ukraine was not the yen carry trade…. Each of these events, effectively unpredictable, were different in their nature and impact on the market.
But what is not different each time is the broad market’s ability to recover from these events – even ones as dramatic as a worldwide pandemic that shut down much of the world economy for months on end.
I hear from investors (thankfully not often) when such events occur – let’s use the tariff tantrum of 2025 – and they will say things like, ‘….I know stocks recover after declines, but this time feels different…’ They then go on to justify why they want to sell their blue-chip companies – the very ones that have survived everything the world has thrown at them often for many decades. Per usual, the market soon bottoms and stocks recover, the investor now regretting his decision to sell at panic lows.
In last month’s newsletter I said that “It is also not possible to determine when the 6% decline quickly turns into a 10% gain and never gets into correction territory.” That was on March 9th, the NASDAQ (QQQ) trading around $600 that day. Today, approximately 25 trading days later, QQQ is $664, over 10% higher. I am not saying I predicted the V shaped rally – I didn’t. I’m saying stocks always eventually recover from declines – and no one can time the bottom – so one way to avoid the negative effects of a bear attack is to not panic sell into that weakness.
Because when it comes to the resiliency of broad-based US stock market indices like the S&P 500 or the NASDAQ 100, this time is not different as it relates to market recoveries. Yes, the headlines causing the decline are different – but these are irrelevant (from a long-term investing perspective – they can be very relevant from a societal perspective, a personal perspective, etc.). If I were to show the average investor a chart of the stock market over the last 20 years and asked them to identify the headlines causing the declines at the time, in most cased they would not even remember what it was.
Bottom line, you are often well served ignoring ever-changing headlines, or at least thinking very carefully about your long-term holdings (AKA stocks) before taking action that could hurt your future pocketbook. It always feels ‘different’ – and bad – when stock prices are declining. But if the last 200 years of stock market performance has taught us anything, it is that a well-diversified portfolio of blue chips stocks has the ability to recover from near-term price declines regardless of today’s negative headlines.