Exceptional 18 Months
The S&P 500 Index has doubled in a span of less than 18 months. From March 23, 2020 to September 2, 2021, the index went from 2237 at the bottom of the Corona Crash to the current all time high of 4536. This may have been done before, but that makes it no less remarkable. Besides doubling in a year and a half, the index has spent almost the entire rally within 5% of its all-time high. Hitting all-time highs is not even news anymore. There have been no serious corrections.
Since the early September high, we have reached a 5 percent decline (as of 9/30). According to JP Morgan’s Guide to Markets, the average intra-year correction is 14%. When the market experiences this kind of correction, the index ends the year with a positive return about 75% of the time. History says positive return years happen about 80% of the time, so a decent correction in the middle usually doesn’t jinx the whole year. 2020 is a great example.
It's not that I expect or want a correction, I don’t really care. Corrections are a normal and regular experience for a long-term investor. Volatility is what markets do. Maybe more pointedly, this is what people do. It is a cycle of emotion that is totally human. Market indices are just scorekeeping. People play the game.
So, what should we do? I think we take care of the personal. Federal debt and spending, taxes, inflation, market tops and blow offs are external areas we have no control over. We control stuff that is personal, such as spending, how much of our income we save and how we chose investments. We take care of business at home. Stay informed, but remember that there are agendas out there that don’t have your best interest in mind. Most of the people who warn us of some financial market disaster don’t even advise people on how to invest. They are just being provocative for some element of personal gain, fame, promotion, etc. They are NOT trying to save you. Listening to them will not help.
We may not have been exactly in this spot before, but behaving like a long-term investor still applies.