As many of you know, the past few weeks have not been as kind to the global stock market as the previous six months were, with both the S&P 500 and the broader global stock market declining roughly 8% between their most recent peak on July 16th and the time of this writing.1
No one likes uncertainty, particularly as it relates to money and investments, but it’s important to remember that declines like this are totally normal experiences and happen often. The red dots on the chart below show the largest intra-year decline in the S&P 500 index for each calendar year going back to 1980. The gray bars represent the total return for the year.
Source: JPMorgan Guide to the Markets, July 31, 2024
Returns are based on price index only and do not include dividends. Intra-year drops refer to the largest market drops from a peak to a trough during the year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2023, over which time period the average annual return was 10.3%.
We see from this graph that a decline like the one we’ve experienced over the last several weeks is a very common experience. From 1980-2023 the S&P has experienced, on average, a 14% decline within a given calendar year. We also see from the gray bars that the S&P 500 has produced positive returns in 75% of those calendar years despite those intra-year declines. Volatility is a feature of the stock market rather than a bug, and the stock market has generally rewarded investors who are patient and accepting of that uncertainty.
While the media floods us with sensationalized headlines, we lean on our core principles of investing with conviction in broadly diversified portfolios, disciplined rebalancing, and an eye towards long-term returns to navigate periods of uncertainty, however long those may be.
The recent market decline may be a first for some of you, while others have read and heard this counsel from us many times in the past. Our advice to avoid acting on emotions, refrain from trying to predict the next move of the stock market, and to view market declines as common occurrences, not as glitches, has been consistent throughout our firm’s history. We are confident that it gives you the best odds of achieving your investment goals.
“The stock market is a giant distraction from the business of investing.” – John Bogle, founder of the Vanguard Group
1 Source: YCharts. Return as of August 6, 2024. S&P 500 Index. Global stock market represented by the MSCI ACWI Index.
Important disclosures:
Advisory services provided by TFO Wealth Partners, LLC. Past performance is not indicative of future results. This presentation is designed to be informational in nature and is not intended to be construed as financial advice or a specific recommendation. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of an investor’s portfolio. Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. All expressions of opinion are subject to change and should not be construed as an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned. We believe this information provided is reliable, but do not warrant its accuracy or completeness. It is provided for informational purposes only and should not be construed as legal or tax advice. Laws may change pursuant to the new administration’s legislative agenda. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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