I hope you and your family are well! For the first time since March 2020, the S&P500 Index officially moved into correction territory, down over 10% from the recent highs. Of course, many stocks have already been in a correction, with some even in bear markets (over 20% down from recent peak). During times of volatility, it is important to remember that intra-year declines are a normal part of investing. As you will see in the below chart, intra-year declines (red dots) are inevitable, and each year will contain some sort of pullback. In fact, since 1980, the average annual peak-to-trough decline has been about 14%. However, in 32 of the past 42 years, or over 75% of the time, the S&P500 has ended the year in the positive (gray bars). History is heavily on the side of those investors who don’t overreact to market corrections.
We came into this year expecting that the global economy would slow after robust growth in 2021, and that volatility would increase with the markets worried about increasing interest rates and a midterm election year bringing uncertainty. It is important to remember that over the last few rate hike cycles, stocks have done well before and after the hike. U.S. consumers and businesses are still in great shape and the economy is expected to grow by about 4% this year, well above the average of the last decade.
The unfolding events with Russia and Ukraine have us all on the edge of our seats. It is normal and expected to be apprehensive about what this crisis can bring. Like the markets, none of us like uncertainty. However, we need to stay the course with our investments and plan remembering that we are investing for the long term. Below is a chart showing market volatility around geopolitical events going back to 1973. As you will see, volatility due to these incidents tends to be short-lived.
We expect 2022 will be a constant tug of war between the bulls and bears, but the bulls should win in the end. As always, we are long-term, vision and goal-focused investors and this too shall pass.
Thank you allowing us to be of service to you and your family! Reach out if you have any questions.
All my best,
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.