Last week, I suggested investors may need to look further back in history than just the past few decades to understand today’s markets.
This week, Ray Dalio explains, “What is happening now is just a contemporary version of what has happened innumerable times throughout history.”
Many times, these episodes play out as crises, which usually follow a predictable pattern.
“The crisis cycle starts with a trigger event. In the days that follow, there are aftershocks, and the net effect is usually negative. The effects find their way into the real economy which then feed back into markets,” writes Aswath Damodoran.
This would suggest that the “buy-the-dip” mantra that has served investors so well in recent years may no longer make sense as an investment strategy.
As Owen Lamont writes, “While there are reasonable arguments for buying in April 2025, the quasi-religious belief that the U.S. stock market always goes up is not one of them.”
In fact, the market may already be sending a very clear signal in this regard. “By one measure, it has been the worst year for the ‘buy the dip’ strategy in almost a century,” reports The Wall Street Journal.
This could be Mr. Market’s most effective way of telling investors that times have changed. “Once or twice a century, the world undergoes a transformation of historic importance. Everything changes—but the transformation is so profound that its full magnitude and meaning only become clear in hindsight.”