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S&P 500 Intra-Year Drops

S&P 500 Intra-Year Drops

May 17, 2022
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We have all heard the recent headlines like, “Dow plunges more than 900 points for its worst day since 2020”, “The S&P 500 marks its third straight one-week decline” and “investors fear that Fed rate hikes will slow the economy”. Is this really breaking news or have we seen this before?

The fact of the matter is corrections happen regularly and are to be expected when investing. The economy and the markets go through peaks and troughs or good years and bad years. To help illustrate that concept please look at the graphic below.

This shows the S&P 500 since 2000, how low it went intra-year (represented by the red dot) and what it finished off as (represented by the bar graph). In 14 of the last 22 years or about 64% of the time markets have dropped 10% or more. But of those 14 years, the market ended with a positive return 50% of the time. This really highlights the importance of keeping course in times of volatility. Personally, I like to think of the red bar graphs as rainy days and the yellow as sunny. The stock market’s ups and downs are unpredictable, a lot like the weather, but history supports an expectation of sunny days over the long term.

Going even further back or from the years 1926 to 2020, the S&P 500 has had 17 years of bear markets ranging from down 21% to down 80%. These lasted on average for only about 10 months. While, on the other side, we have seen 18 years of bull markets with gains ranging from up 21% to up 936%! These lasted 5 times longer for an average of 54 months!

We understand that it does not feel good seeing your account balances decrease but know that we have a plan in place within your portfolio and the best course of action is perseverance. As famous financial author Nick Murray states: “Investing is the age-old, never-ending emotional battle between fear of the future and faith in the future”. We hope that you stand with us in our faith in the future and upcoming sunny days.