“Every past decline looks like an opportunity; every future decline looks like a risk.”
Well, there’s no way to sugar coat it, this market has been relentless in downward selling pressure this month. I’ve been doing this for 33 years now and the sheer number of 500-point declines has been breathtaking. Santa is leaving us a lump of coal this year, that’s for sure.
Everywhere the market looks it finds something it doesn’t like. One day it’s trade policy, China’s growth rate and tariffs, the next it’s fears about the economy, then it’s Fed policy, then it’s the Fed actually raising interest rates ¼ percent (which over two days cost about 800 points on the Dow). Add in the oil prices tanking, Trump being Trump, a potential government shutdown…the list goes on and on. Whenever any good news is issued, it is ignored.
A little perspective would be helpful. As of the market close on Thursday, the Dow is down 7.55% YTD and 14.8% from the peak in early October. The S&P 500 is down 7.9% YTD and 17.5% from the October high.
How worried should we be? Nobody likes to go through down markets, so it’s completely understandable to be feeling blue about the current state of the markets. Going back to the early 1900s there’s been an average of one market correction of 10% every year. There’s been a 20% drop once every 3.34 years. That’s almost 120 declines of 10% and 36 declines of 20% over that time. Translation: while painful and scary, these are completely normal. Don’t forget that over this time and despite these declines, the S&P 500 has still averaged 10-11% annually.
The graph below, showing all the market drops since 2010, was created at the end of last year, so it doesn’t show the drop we had in February of this year, which was a 10%er. I have yet to meet a single person who even remembers that drop, yet it was a substantial one.
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