5/13/22

TGIF friends,

The S&P 500 average's one pullback of 20% or more every four years. At the low's yesterday, the S&P was down 20% from the all-time high. Which marked the THIRD pullback of 20% or more in the past four years! I am a huge believer that historical data is a phenomenal predictor of future returns and an even bigger believer in math. I believe we are due for a revision to the mean. Which would mean that once we reclaim a new all-time high we could be in for much calmer waters for a few years.

So, should you wait for the market to re-claim all-time highs before investing, adding, or getting more aggressive? Absolutely not. At the low’s yesterday, over 30% of all US stocks were trading at a 52 week low. This has only happened 18 times since 1984. The market’s average return one year later was….32%!

Seeing how none of us own a crystal ball, the strategy should always be to find the path of least resistance. Well, the market is currently experiencing the worst start (90 trading days) to a year since 1932. The 7 worst years span from 1932 to 2020. After the 90th day, the market finished the year higher 6 out of 7 times, for an average return of 16.5%. The one down year (1941) saw the market 8% lower by the end of the year. The path of least resistance over the next 6-18 months is higher in my opinion. 

In good times or bad, people often say, “This time is different.” It usually isn’t. The world has changed, technology has changed, but human psychology hasn’t. And that’s what drives the market. 

As always, I am here for you. I hope you all have an awesome weekend!

JC