Stay The Course

After gaining more than 120% between March 23, 2020 and January 3 of this year, the S&P 500 index, a benchmark of the 500 largest companies in the U.S., has fallen nearly 20% over the last four months. In addition to the War in Ukraine, a sharp uptick in inflation, which has been climbing rapidly for a year and hit a high of 8.5% in March, has weighed on consumers and businesses, and led the Federal Reserve to hike interest rates as it tightens monetary policy.

With all the disconcerting news, It would be easy to miss the broadly positive figures reported over the Q1 earnings season. Of course, downturns can be scary, even though index returns since 1925 show 10% losses have happened every 11 months on average, 15% drops have occurred on average every other year and 20% Bear Markets have taken place every 3.5 years. It also takes longer for the index to rise than fall, with 10% gains taking nearly 250 calendar days on average, compared to around 100 days for 10% losses. For respective 15% advances and declines, it takes on average more than 500 days and 200 days. Bear Market happen even quicker – 286 days – with 20% or greater advances lasting 995 days, on average.