The Week in Review: October 18, 2021
Pullbacks Are Inevitable—a Numeric Overview
Market pullbacks are inevitable, but they are difficult to predict. Those who attempt to time the market must be right twice, getting out near the top and getting back in near the bottom. It’s usually a losing endeavor. So should we weather down markets?
Two things stand out in the graphic below. First, pullbacks during the year are inevitable. Sometimes they are minor, and sometimes they are unsettling.
Second, the broad-based S&P 500 Index has historically done well. In most years, the index has finished higher, including years when stocks hit turbulence.
A Run Through the Numbers
Volatility is part of the investment landscape. Since 1980, the average annual pullback (or intra-year peak-to-trough decline) has been 14%. Yet, since 1980, the S&P 500 has managed a positive return 83% of the time (including 2021—through October 14).
So far, the maximum pullback this year has been 5.2%. The modest decline occurred between the September 2 peak and the most recent bottom on October 4.
The total 2021 return through October 14 is 19.5%, which is on top of an 18.4% return in 2020 and a 29% return in 2019. The S&P 500 has racked up double-digit gains in five of the last six years.
Since 1980, there have been seven years that incurred a loss. When the S&P 500 Index has been negative, it has averaged a loss during the calendar year of 13.1%.
When the S&P 500 has been positive, it has averaged a return during the calendar year of 17.9%. This includes 2021’s return through October 14.
It seems as if stocks take the stairs up and the elevator down. Historically, however, the S&P 500 Index has been on the stairs much more often than on the elevator.
If you have any questions or concerns, please don’t hesitate to let me know.
Two for the Road
Only 47 stocks in the S&P 500 have fallen in price in the past year. —MarketWatch, September 29, 2021
In the second quarter of 2021, 11.5 Americans quit their job, and by July, 8.4 million potential workers were jobless even as a record 10.9 million positions remained open. —The Week, October 3, 2021
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1. The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
2. The NASDAQ Composite is an unmanaged index of companies which cannot be invested into directly. Past performance does not guarantee future results.
3. The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4. The Global Dow is an unmanaged index composed of stocks of 150 top companies. It cannot be invested into directly. Past performance does not guarantee future results.
5. CME Group front-month contract; Prices can and do vary; past performance does not guarantee future results.
6. CME Group continuous contract; Prices can and do vary; past performance does not guarantee future results.