Have you ever experienced a rough flight?

Photo: Jarrah Tree. Source: Wikipedia. CC0.

We’ve all been there. Watching a movie, or in the aisle stretching our legs, when the captain chimes in on the speaker: “Ladies and gentlemen, the radar has detected some turbulence up ahead. Please return to your seats and fasten your seatbelt.” Pretty soon the aircraft is shaking and bumping, buffeted by conflicting wind currents. The worst thing that happens, usually, is that the drink on the tray table may get spilled.

When I was in my teens, I learned to fly small, private airplanes. I went to ground school, received flight instruction, soloed, and eventually passed my check ride. One of the items my training emphasized was the importance of planning – knowing the aircraft, the instruments, the weather, the airfields, and the myriad factors that go into a successful flight.

My favorite trainer, a Piper Super Cub.

Photo: Robert Frola. Source: Wikipedia

Sometimes, things went wrong. The radio was notoriously fickle. Sometimes I could hear the tower but not transmit. Sometimes I could transmit but not hear. And sometimes the radio failed completely. Once, during a long flight, I noticed that the strobe lights on my wingtips stopped flashing. My battery had gone completely dead, so I had no electrical systems at all.

Fortunately, private pilot training prepares us for unexpected problems. Control towers like the one at my home field have powerful “light guns” for communicating with airplanes that can’t respond to their radio calls. They sent up a series of colored flashing lights to tell me where and when to land.

Public Domain. Source: NARA.

Dealing with surprises is part of the training. One of the most riveting movies to come out lately was “Sully,” the story of Chester “Sully” Sullenberger and the 2009 US Airways Flight that he piloted, known as the “Miracle on the Hudson.” Shortly after takeoff, his flight struck a flock of birds, damaging both engines. Immediately, Sullenberger called for the QR, the quick reference guide for the aircraft. After trying to restart the engines, Sully successfully ditched in the Hudson River, resulting in almost no injuries. Sullenberger was hailed as a hero – not because he did something superhuman, but because he followed a plan and did his job. He didn’t panic. Instead, he relied on his instruments, his training, and his decades of experience, and these almost certainly saved hundreds of lives.

Photo: Paul Brennan. Source: Pixabay.

Currently, we’re dealing with a lot of surprises: the highest inflation in 40 years, a newly aggressive Fed, turbulent geopolitics, product shortages at home, not to mention the aftermath of the first global pandemic in over a century. Any one of these issues would be a serious matter to address. Put all of them together, and we have some serious turbulence. But our investments should always be part of a larger financial picture – a plan that should also consider market turbulence, changes in interest rates, and different market outcomes.

On average, the market drops by 10% or more every other year. And it falls for good reasons. Here are the times over the past 13 years that the market has faced 10% corrections or more:

Coronavirus (2020)
Fed Tightening (2018)
Oil Price Crash (2016)
Eurodollar Crisis (2011)
Greek Debt Crisis (2010)
Financial Crisis (2009)

After each crisis, the economy recovered and the market went on to reach new highs.

S&P 1500 since Financial Crisis. Source: Bloomberg.

When we’re on an airline, the captain and crew often tell us that we could experience a little turbulence. Hey, we don’t expect that they can control the weather. But they know the airplane, they have a flight plan, so we’re pretty sure when we’ll reach our destination. As long as we stick to our plan.