Given the recent market declines, it is worthwhile to dust off a couple of our favorite charts and tables.
This first chart is produced by J.P. Morgan Asset Management. It illustrates the annual returns of the S&P 500 each year from 1980 through 2017 as well as the largest intra-year drop in each of those calendar years. You can see that even in year with positive returns, it is not uncommon to experience significant declines within a particular year.
The following table that Guggenheim Investments put together from research conducted by Ned Davis also helps provide some perspective to market declines. This table illustrates the frequency of various declines in the S&P 500 from 1946 through the end of 2017. There have been 115 occasions where the S&P 500 declined by more than 5%. The vast majority of those instances were declines of between 5% and 10%. Those declines last one month on average, and also recovered in one month on average. You can see more information related to the chart at the following website: https://www.guggenheiminvestments.com/putting-pullbacks-in-perspective
Through the end of January, the S&P 500 was up a record 15th month in a row. The S&P 500 has never moved up for more than 15 months in a row, and only matched this record once before, in the late 1950’s. Long stretches of time without any declines are abnormal. The current decline that we are experiencing is normal. Maintaining a disciplined process of rebalancing to your target allocation within the framework of a diversified portfolio is the best approach to managing through any market decline, the current decline included.
If you would like to discuss this in further detail, feel free to reach out to your advisor