A Good Chart to Have Today

Updated: Dec 10, 2019

It looks to be a bumpy open this morning after what was a WILD ride yesterday. You will hear many experts provide their reasons why we are having a sharp pullback. Was it due to rising yields? The feds? A volatility shock?

Everyone wants a complex sounding reason for why the market goes down. That said, sometimes it's as simple as "it is down because it went up A LOT". This too, shall pass.

Here is a handy chart to assess the situation. It paints a picture.

The chart from J. P. Morgan illustrates the annual rate of return (grey bars) for the S&P 500 going back to 1980.

Also plotted on the chart are the intra-year declines (red dots with negative numbers) experienced in the market every year over that time period.

A few things to point out:

  • The market has experienced a drop of some magnitude every single year over the past 35 years

  • The average market drop each year is 13.8%

  • In 29 out of 38 years (i.e. 77% of the time) the market has ended up finishing the year with a positive return

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