The markets are once again doing what markets do. Volatility is back in the headline news. Let’s take a moment and look back at what’s happened in 2018. The DOW opened at 24,809 on January 2nd and climbed to 26,616 by January 26th, an astonishing 7.5% gain in a mere 19 trading days.
Monday was the worst day that the DOW has ever had in terms of POINTS. Is this perhaps market hype? The DOW was down 4.6%. Don’t get me wrong; this is a very large one-day loss, but NOT the historic plunge the media is making this out to be. In percentage terms, we have seen many days like the one we saw on Monday.
I can certainly understand that for many, it is difficult to hear the negative news and not be concerned. I hope some historical perspective might be helpful.
First, we know that stocks usually go up! However, they certainly also come down — and perhaps more often than you might think.
- Only once in the last 89 years has the S&P 500 NOT dropped at least 4.4% from an INTERIM peak. In 2016, there were FOUR of these interim downturns. Nevertheless, in 2016, the S&P 500 rose 9.5%.
- Three-Quarters of the time, these intra-year downturns were 10% or more and the average was 17%. I am sure we can all remember those brutal stock market moves we saw both during the BREXIT vote and the US election.
So, what is a prudent investor to do during periods of significant market volatility? Please remember that:
- Downturns are to be expected, and your portfolio was designed and is being managed with volatility in mind.
- Volatility is the friend of the long-term prudent investor because real market returns come from market volatility.
If you have any questions or concerns, please contact me. I am available to speak with you on the phone or meet in person. My goal is to help you achieve financial peace of mind.
By the way, as I type this post, the S&P is up 290 points.