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Why Investors Can’t Kick the ‘Past Performance’ Habit

Why Investors Can’t Kick the ‘Past Performance’ Habit

On Monday, July 19, financial markets hit instant replay.

As fear spread that the Delta variant of Covid-19 might ravage the economy, U.S. stocks fell more than 2% at their lows. Crude oil sank 7.5%, its biggest daily loss in almost a year.

Airlines, oil and gas, cruise lines, hotels and shopping malls got pounded—just as they had in February and March 2020. Grocery stores, online retailers, pharmaceuticals, technology and personal-hygiene stocks went up or held steady; they fared relatively well during last year’s panic, too.

Past performance suddenly felt like a guarantee of future results—but investors should always remember that it isn’t.

How similar was this Monday to last year’s pandemic panic? Eight of the 20 worst decliners in the S&P 500 this time had been among those with the deepest losses last time. United Airlines Holdings Inc., down 5.5% this past Monday, had fallen 66.9% between Feb. 19 and March 23, 2020. Oneok Inc., the natural-gas company, fell 5.8% on Monday and 74.5% in the 2020 decline. Norwegian Cruise Line Holdings Ltd. dropped 5.5% on Monday and 81.4% in last year’s Covid crash.

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