As we move through what has been a strong (so far) earnings season, broad markets have remained volatile. While the blended Q1 2018 earnings growth rate for the S&P 500 currently stands at 18.3%, its highest level since Q1 2011, the Index remains below its most recent all-time-high reached on January 26. This recent pullback, which officially became a “market correction” after falling 10.16% from the all-time-highs on February 8, has now lasted 88 calendar days (52 trading days).
Though the past three months have proven wearisome, causing angst among many investors, the recent market environment has not been anything out of the ordinary. In the postwar period (since end of 1945), there have been 27 corrections of between 10% and 20%. The average decline for these is 13% and takes an average of four months to recover losses. However, the abruptness of this recent correction, combined with the historically low levels of volatility experienced through all of 2017, has made this pullback feel much more severe than it actually may be.
Even with all of the recent volatility and downward pressure, most indices (including bonds) are down only about 1 – 2% year-to-date; and some indices are even positive.
Despite the recent increase in volatility, longer-term momentum remains mostly intact and factors such as corporate earnings and economic fundamentals remain strong.
As investors, we need to stay committed to our long-term financial goals. Staying focused on our long-term investment objectives and maintaining a disciplined investment strategy can reduce daily market noise and increase the odds of a successful outcome over time.
Source: Phil Calandara