After a turbulent 2015, stocks tumbled in the first few weeks of 2016, causing concerns that the bull market U.S. equities have enjoyed since 2009 may be over.
Plagued by worries about global economic growth, the S&P 500 dropped 7.75% in the first two weeks of 2016.1 While the pullback surprised many investors, corrections in the 5-10% range are not unusual.
Since 1928, the S&P 500 has experienced corrections of more than 5% about three or four times each year.2 We see declines of 10% or more every 1-1/2 years, and bear market corrections of 20% or more about every three or four years.3 Obviously, these are all averages and the performance of any single year can deviate significantly from historical norms.
Plagued by worries about global economic growth, the S&P 500 dropped 7.75% in the first two weeks of 2016.1 While the pullback surprised many investors, corrections in the 5-10% range are not unusual.
Since 1928, the S&P 500 has experienced corrections of more than 5% about three or four times each year.2 We see declines of 10% or more every 1-1/2 years, and bear market corrections of 20% or more about every three or four years.3 Obviously, these are all averages and the performance of any single year can deviate significantly from historical norms.
Though market corrections are rarely welcome, they are a natural part of the overall business cycle, and it is important to take them in stride. The most important thing is not to give in to emotion. While it can be tempting to eject when downside volatility is being experienced, impulsive decisions can be a killer to your portfolio. The only way to ensure you can reliability expect to earn a market rate of return over time is to stay invested in the market throughout time.
Having a sound financial plan in place couple with a diversified portfolio to support the plan is step one. Step two is having the discipline to execute the plan and stay invested over time.
Having a sound financial plan in place couple with a diversified portfolio to support the plan is step one. Step two is having the discipline to execute the plan and stay invested over time.
Kevin Kroskey, CFP®, MBA
All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Diversification does not guarantee profit nor is it guaranteed to protect assets.