An ugly few days in the market over the last week, but LONG overdue. I'm sure you've seen many of the same expressions of disbelief about how well the market had been doing and how long it had been since we'd seen any kind of a material pullback. I had one client who said last week, "I'm finally glad that I'll get to see how much money I actually have." So, nothing terribly unusual about the last week's move (other than it's been so long in the making). What has been unusual is the long period of low market volatility and uninterrupted upward momentum that we've seen over the last few years.
I know many will ask, "How long might this go on for?" and, of course, it could be over by sundown or continue in some form or the other for several months. Just no way to know. No way at all. The last week's events have taken us almost all the way back to...(wait for it)...January 4th, when the Dow first crossed 25,000.
In any case, I just thought I'd take a moment to share those few comments and to send the following chart, which shows the average intra-year loss on the S&P 500 vs. the year-by-year returns. The red dots show the largest intra-year decline for each calendar year, while the grey bars show the total returns for those same years.
So, take 2010, for example: the S&P 500 saw a -16% intra-year drop and yet the overall return for that year was +13%. The average intra-year decline for all years (meaning the average temporary downward fluctuation that we've seen across all years) has been -13.8%. We're still positive for this year--so far at least, although that may yet change. Worth keeping in mind.