What a year, right? After three weeks of scary market volatility, let’s all take a deep breath and look at the following chart for some perspective.
The little BURGUNDY DOTS on the chart are the biggest percentage drop in the S&P 500 for each year going back to 1980. Those drops have averaged 14% during the 36 year period, including 2016 (through Jan. 15, 2016). The BLUE BARS indicate S&P 500 performance over the entire year (again including 2016 so far).
Two things worth noting: (1) Virtually all the years had pretty large maximum down moves. (2) Despite the drops, the S&P finished the year up 75% of the time: 27 out of 36 years, if you include 2016 so far. Through Jan. 15, 2016, the S&P was down 8%, which at that time was also the maximum drop for the year. Will 2016 be another down year? No one knows. Each market cycle really is different, and past performance is not indicative of future performance. Still, it is some comfort to see that a bad start to a year doesn’t necessarily mean a bad finish.