Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
FYI: From their high on May 21, 2015, global stock prices lost about 19% of their value through January 20, 2016. The setback qualifies as a "correction," which is conventionally defined as a decline of 10% or more. The term "bear market" typically refers to a decline of 20% or more lasting at least two months. Regards, Ted https://personal.vanguard.com/us/insights/article/market-correction-vanguard-perspective-012016
Significant equity market downturns occur more frequently than most investors believe.
Of course, much of that belief depends on the threshold values defined as a significant market downslide. By common definition, a Bear market is arbitrarily defined as a 20% negative move. Keep (bear) in mind that the 20% level is purely arbitrary; other values could have been equally specified with the same minimal logical framework.
And what is true for the threshold Bear market specification is also true for selecting the end of the year as a standard measurement cutoff date. The market is a continuum. Intra-year performance is as important as inter-year performance. Sometimes we don’t focus enough attention on that shorter term market behavior.
The market is and has always been highly volatile. How volatile? The following Link (a 2015 Ben Carlson article) provides a nice, memorable summary chart:
Please give it a look-see. Note how often a more than 10% intra-year downturn has been recorded; it’s like 48% of the time. Also, intra-year market slides exceeding 20% value loss have been registered about 17% of the time since 1950.
These data should cause an investor to pause if that investor is adverse to such volatility. But it is an historical, integral part of the equity marketplace. No pain, no gain.
Thank you Ted for the reference that prompted my reply.
Nice chart. From it, in the period 1950/2014 there have been about 37 drawdowns equal to or greater than our current animal. Could very well be lots more downside in store.
Comments
Significant equity market downturns occur more frequently than most investors believe.
Of course, much of that belief depends on the threshold values defined as a significant market downslide. By common definition, a Bear market is arbitrarily defined as a 20% negative move. Keep (bear) in mind that the 20% level is purely arbitrary; other values could have been equally specified with the same minimal logical framework.
And what is true for the threshold Bear market specification is also true for selecting the end of the year as a standard measurement cutoff date. The market is a continuum. Intra-year performance is as important as inter-year performance. Sometimes we don’t focus enough attention on that shorter term market behavior.
The market is and has always been highly volatile. How volatile? The following Link (a 2015 Ben Carlson article) provides a nice, memorable summary chart:
http://awealthofcommonsense.com/2015/05/to-win-you-have-to-be-willing-to-lose/
Please give it a look-see. Note how often a more than 10% intra-year downturn has been recorded; it’s like 48% of the time. Also, intra-year market slides exceeding 20% value loss have been registered about 17% of the time since 1950.
These data should cause an investor to pause if that investor is adverse to such volatility. But it is an historical, integral part of the equity marketplace. No pain, no gain.
Thank you Ted for the reference that prompted my reply.
Best Wishes.
Regards,
Ted
What people do not discuss is a N225 scenario or a DOW after '29 but no WWII to end it.
https://finance.yahoo.com/echarts?s=^n225+Interactive#{"range":"max","allowChartStacking":true}
There can be periods of time where stocks are down for long periods of time - NOT a steep decline and fast rise.
I think we are about to enter that type of stock market - a longish period of stock under performance.