Perspective on this Market Correction
2022 has proven to be a very difficult year for investors. Markets hate uncertainty and we are living through plenty of it... war, inflation, rising interest rates, supply chain disruptions, COVID sub-variants, mid-term elections, negative GDP, etc.
Markets remain in turmoil and we expect continued volatility with the lack of clarity on the direction of inflation, interest rates and the impact on the real economy. Until then, markets will remain hostage to selling pressure and a buyer's strike. However, as new data points are released over the upcoming months, we believe stock and bond markets will then begin to stabilize with investors returning to productive, quality investments as they gain a better feel for the “new normal” in the economy. Markets have a funny way recalibrating at extremes but they can also reverse course quickly, and often before investors feel comfortable.
Prices can remain oversold (or overbought) for an extended period of time, but they don't stay that way forever.”
Timing the markets is an impossible task, so it’s important to set forth an investment plan and then revisit it often. Investing can feel like a roller coaster at times, but time tends to calm and resolve extreme uncertainty in the short-term. Remember that investing is not “all-in” or “all-out” but rather being diversified and balanced to help mitigate these large swings and keep your eye on your financial goals.
This period of transition is not easy, uncomfortable and stressful for investors but we are here to guide, support and assist.
The Correction Looks Normal (So Far)
- There have been 24 other corrections for the S&P 500 since WWII.
- The avg correction was 14.3% and took 133 days.
- The current correction is 13.9% and up to 117 days.
- Yes, this isn't done and there could be more pain, but this is not out of the ordinary yet.
The market correction in stocks, bonds and loss of purchasing power due to inflation have created a difficult investment environment. To show the historic nature of the market sell-off from last week, you can view the two back-to-back stock market days and how rare these extreme percentage moves have been historically.
One of the Best Charts for Investors
- -14% = the average intra-year decline in the stock market since 1980 (today's level).
- 76% of calendar years (32 of 42) have produced positive stock market returns since 1980.
- Red Dots = Calendar year market declines.
- Grey Bars = Annual performance at the end of the year.
Opportunity or Risk
For Additional Perspective & Sandbox Commentary
- Some Thoughts on a Difficult 2022 - May 9, 2022 (Read here)
- Perspective for Corrections, Bear Markets and a War - February 22, 2022 (Read here)
- When the stock market plunges, Remember to keep perspective - February 1, 2022 (Read here)
- Comments on the Market Correction - January 25, 2022 (Read here)
- The Investor's Cycle of Market Emotions - October 5, 2021 (Read here)