This is a quick post that I wanted to get out since there is currently a ton of fear going through the markets, and rightfully so. We have the Russian invasion of Ukraine, high inflation, and the Federal Reserve Board on the cusp of starting to raise interest rates.
With all that going on, it’s no surprise that the stock market has dropped about 12% since the start of the year. Some investors may even be thinking about getting out of the market completely and waiting until all of this blows over. For those that are worried, I give you this simple table that might help get rid of some of that investor angst.
This illustration shows all the years back to 1960 when the S&P 500 was down 8% or more after the first 48 trading days of the year.
As you can see, stocks performed quite well after such a bad start with the exception of just two times. In 2001, we had 9/11 towards the end of the year which was the main catalyst for the drop that year. In 2008, the start of the Great Recession began in the fall of that year. Based on this data, 2022 should end up being a decent year for stocks, barring an unexpected event towards the end of the year.
I know this is a glass-half-full way of looking at the recent market drop but from an historic viewpoint, the odds for a nice recovery are on our side.
Let me know if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
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