Stock Selloff Stats

Stocks & Bonds

 Peter Lazaroff By: Peter Lazaroff

Market sentiment remains negative with the S&P 500 down 12.3% to date and 13.92% from the high point set in May 2015.

Our thoughts on recent market volatility as well as several other big topics are covered at length in the 2016 Plancorp Annual Investment Review.  You can access the issue by clicking this link.

In the meantime, I’d like to highlight some statistics from a Vanguard article that struck me as particularly interesting:

  • Since 1980, the global stock market has experienced 12 corrections and 7 bear markets. Over that time frame, stocks have spent almost 30% of trading days in corrections or bear markets.
  • U.S. stocks, as measured by the S&P 500, have spent 40% of trading days in corrections or bear markets dating back to 1928. Over that time period, the S&P 500 has an average annualized return of 9.72%.

 

Over the past several months, we’ve frequently expressed how normal the recent market volatility is for long-term investors.  Volatility is not the enemy, but rather it is the cost of higher expected returns for stocks compared to bonds or cash.  Since you likely have a multi-decade time horizon, you have the ability to tolerate periods of lower prices.

We can’t predict whether or not the correction will turn into a bear market or when prices will begin to rise again.  Constantly watching every market move is likely to have a detrimental effect on your investment outcomes.  Instead, a better course of action at this time is to focus on opportunities such as tax loss harvesting, rebalancing, and investing new cash at discounted prices.

 

 

 

Sources and Disclosures:

Index performance returns do not reflect any management fees, transaction costs or expenses.  Indexes are unmanaged and one cannot invest directly in an index.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investing involves risk. It should not be assumed that recommendations made in the future will be profitable or will equal the performance shown. Investment returns and principal value of an investment will fluctuate and losses may occur. Diversification does not ensure a profit or guarantee against a loss.

Global stocks statistics from Vanguard are represented by the MSCI World Index from January 1, 1980 through December 1987, and the MSCI All Country World Index thereafter.

S&P 500 Index® is widely regarded as the best single gauge of the U.S. equities market, this market-capitalization-weighted index includes a representative sample of 500 leading companies in the foremost industries of the U.S. economy and provides over 80% coverage of U.S. equities.

MSCI World Index® captures large and mid cap representation across 23 Developed Markets countries.  With 1,652 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

MSCI All Country World Index® captures large, mid and small cap representation across 23 Developed Markets countries and 23 Emerging Markets countries.  With 2,490 constituents, the index covers approximately 85% of the global equity opportunity.

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Peter Lazaroff, Chief Investment Officer, first took an interest in investing when his grandmother gave him a single share of Nike stock for his 13th birthday. Today, nearly 20 years later, his investment insights are highly sought after by local and national media. More »