Why the Stock Market Sometimes Drops on Good News—and Why It’s Often a Buying Opportunity
Happy New Year Friends,
It’s not uncommon for the stock market to react negatively to good economic news. As counterintuitive as it may seem, positive data—like strong job numbers or higher-than-expected GDP growth—can trigger fears that the Federal Reserve might adopt a more hawkish stance, leading to higher interest rates. This dynamic played out last week, with the market pulling back sharply despite strong economic performance. But what happens after these pullbacks?
Let’s dive into the data. Over the past decade, there have been several instances where the S&P 500 dropped by 5% or more following strong economic reports. In August 2015, the index fell sharply as global uncertainties collided with robust U.S. data. Six months later, the market had rebounded, posting gains of approximately 5%. In early 2018, fears of accelerated rate hikes sent the market tumbling by more than 5% in February. By August, the S&P 500 had fully recovered and climbed 10% higher. And in late 2018, following a larger correction of over 10%, the index surged back with a six-month gain of approximately 15%.
On average, these three instances produced a six-month return of about 10%. This highlights a key takeaway for investors: while the market may react negatively in the short term to good news due to rate hike fears, the underlying strength of the economy often supports a rebound over time. Historically, these pullbacks have proven to be opportunities rather than setbacks for long-term investors.
At RollingWave Capital, we believe in looking beyond the headlines. While it’s easy to get caught up in the day-to-day market noise, our focus remains on building strategies that capitalize on both short-term opportunities and long-term growth. The next time the market reacts to good news, don’t panic—prepare. If you’re not confident your portfolio is positioned to thrive in today’s market, let’s talk.
Are you leaving gains on the table? Let us help you find out.
Contact us at RollingWave Capital and take control of your financial future today.
JC
Jacob R. Craton
President
561.571.1981
RollingWave Capital- Past performance is not indicative of future results. All investments involve risk, including the potential loss of principal. – This content is for informational purposes only and should not be considered as financial or investment advice. Please consult a qualified financial advisor before making investment decisions. – The stock market is subject to various risks, including economic, political, and regulatory developments that may impact performance. – Any examples or historical data provided are for illustrative purposes only and should not be construed as recommendations. – The analysis provided references historical events and market behavior, which may not predict or guarantee future results. – Economic and market conditions are subject to change and can influence future returns differently than past patterns. – Investment outcomes may vary based on individual goals, risk tolerance, and time horizon. – RollingWave Capital is a registered investment advisor. Registration does not imply a certain level of skill or training. – Any external data referenced is believed to be accurate but has not been independently verified. – Certain statements contained herein may constitute forward-looking statements, which are subject to risks and uncertainties. – Contacting us or responding to this email does not obligate you to engage our services. – This communication may include promotional content or marketing material for RollingWave Capital.