Market Perspective

Oct 12, 2018 | Nick Hamilton


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Without proper context, we are all at risk of an emotional response which could adversely affect our long term growth goals.

In light of the recent (and sizable) down days for stocks here is some historical context that will help put this volatility into perspective. Moves of several percentage points in a day to the downside are clearly not enjoyable but more importantly, they are not uncommon. In the attached chart from RBC Global Asset Management, we track the number of days where the S&P 500 stock market was down by 2% or more. The blue columns show the total count for each year dating back to 1998. The most important take away is that the event is not uncommon and the 20 year average works out to be 11 trading days a year where this type of move occurs. In 2018 we have already seen similar market behaviour back in February, March and April and with the recent down days we now stand at 8, still below the 20 year average.

 

This chart is useful in providing context for Market volatility and understanding what is ‘normal’ in terms of the historical behaviour of stock markets. Without proper context, we are all at risk of an emotional response which could adversely affect our long term growth goals. Market volatility is a normal part of the cycles at play in stock markets all around the world.

Despite the market volatility, overall market indicators continue to look quite strong. We are just starting another earnings season in the US and as I write this several of the US banks are reporting earnings beats this morning. These are the facts that are more important day to day. Unfortunately the media does a good job at making us afraid, so I hope this update is useful to you.

 

Please feel free to share with others you know and care about who may be looking for guidance. If you have any specific questions or would like to chat please call the office at 705-444-4777 and we can meet for a coffee.

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