A Big Stock Market Sell-Off Rarely Means Negative Returns For The Year
Feb 6, 2014, 21:37 IST
So far, 2014 has been a volatile year for the stock market. The S&P 500 has gone from its all-time high of 1,850 on January 15 to a low of 1,737 on Wednesday.
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This is a brutal 6.1% intra-year decline. For the year, the S&P 500 is no down 5.2%.
However, these big intra-year drops are very typical of the markets.
Check out this chart from JP Morgan Funds' David Kelly. According to Kelly's research, the average largest annual intra-year drop since 1980 is a whopping 14.4%. This makes this year's sell-off look minuscule.
More importantly, annual returns during these years have been positive 26 out of 34 times.
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Yes, the recent volatility hurts. But it's no reason to freak out.
