Since the March 2009 lows of the Global Financial Crisis, the S&P 500 has compounded at an average annual rate of 16% until this past February 19.
To hear the media tell it, something unthinkable has happened between February 19 and this morning, May 2nd. What was it?
The S&P 500 index declined -7% from the February 19th high. Last time we were at this level was….. October 2024.
So… if we sift through the noise for the signal, the most recent episode of volatility has made the equity market give back the last seven months of a 16-year advance.
For context, the S&P 500 declines ON AVERAGE -14% each year since 1980. 78% of those years, the S&P 500 finished in positive territory.
What this tells me is that the most profitable, well-run companies in America have always bounced back from setbacks quite quickly.
So, when I hear someone in the media complaining about “losing” their retirement savings, or mourning their 401(K) balance, my reaction is to question their honesty, or their investment strategy.
Could they be exaggerating?
A typical diversified growth portfolio, according to the Morningstar allocation average, is down about -2% year to date.
We always use average annual returns in planning- and the advances, as well as the declines, are how we come up with those numbers.
We don’t know what the economy and markets will do over the next few months- because we can’t know.
We do know that our historical resilience is compelling- and as Churchill supposedly said, “The farther backward you can look, the farther forward you can see.”
Aeschylus said, “In war, truth is the first casualty.” Nick Murray says, “in a market decline, the first casualty is perspective.”
Thanks to Nick Murray for the excellent inspiration this month.
The Morningstar Allocation Category Average is based on the average performance of funds within a specific allocation category and does not represent an investable index. Past performance of the category average is not indicative of future results.
The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. Indexes are unmanaged and cannot be invested in directly. Asset allocation does not ensure a profit or protect against a loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Securities and Retirement Plan Consulting Program services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC. Investment Advice offered through Western Wealth Management LLC, a Registered Investment Advisor. Kennebec Wealth Management LLC and Westen Wealth Management LLA are separate entities from LPL Financial.