Stock Market Context

 

Putting the recent stock market sell-off into historical context: A stressful but relatively minor correction. After the volatility we have experienced over the past week, we thought it would be helpful to share some historical context around where we stand in the current bull market and how severe the recent downturn stacks up to past periods of decline.

A bull market is defined as a period in which the prices of securities are rising or are expected to rise, typically characterized by a rise of 20% or more from recent lows. The current bull market in the S&P 500, which began in October 2022, is relatively young and modest compared to other bull markets since 1970. As of July 2024, it has lasted approximately 21 months and generated a total return of about 50% for the S&P 500.

The duration of major bull markets (rallies of more than 20%) since 1970 has varied significantly:

    • 1982-1987 bull market: 5.1 years (60 months), with a total return of 108.4%
    • 1987-2000 bull market: 12.8 years (153 months), with a total return of 816.5%
    • 2002-2007 bull market: 5 years (60 months), with a total return of 108.4%
    • 2009-2020 bull market: 10.9 years (131 months), with a total return of 400.5%

It’s important to note that these long bull markets were often interrupted by shorter bear markets or corrections. For example:

    • The 1987 crash led to a brief 4-month bear market with a 34% decline, but the overall bull market resumed quickly.
    • In 1990, there was a near-bear market decline of 19.9% that lasted about 3 months.
    • The 1998 Asian Currency Crisis caused a sharp 19% pullback that lasted only 1 month before the bull market continued.
    • The S&P 500 has declined by approximately 7.3% since July 16th and the Nasdaq Composite is down 13.2% since July 10th (as of 8/5/2024).

While we aren’t trying to say we are out of the woods yet, in fact we have been highlighting the heightened risk of market volatility heading into the election cycle, we do believe it’s important to ground ourselves in past experience. Sudden market moves can shake our
confidence and cause us to question our long-term convictions. We don’t believe now is the time to make large adjustments to allocations. We advise clients to stay the course.

Talk with your advisors about potential tactical adjustments in your portfolios.

Call us at KinneyMunro Wealth Advisors. We can help.

This material is provided for educational purposes only. The information contained herein is not intended and should not be construed as individualized advice or recommendation of any kind. The indexes referenced are unmanaged and cannot be directly invested into. Past performance does not guarantee future results.

Source documents for data:
https://www.investopedia.com/a-history-of-bear-markets-4582652
https://www.cnbc.com/2019/12/04/bull-markets-often-end-with-a-euphoric-rally-called-a-blow-oƯ-top-we- may-have-just-had-one.html
https://www.forbes.com/advisor/investing/bear-market-history/
https://www.raymondjames.com/neunuebelbarrantes/pdfs/history-of-market-corrections.pdf
https://www.femaleinvest.com/investment-dictionary/bear-market-rally