Markets are off to a rocky start this week, as continued coronavirus fears combined with a global price war in the oil markets to send global stocks into negative territory. While the headlines remain alarming and these significant one-day drops in stock indexes can be jarring, the odds are very high that the markets will rebound meaningfully within the year. Below is a link to a chart from our friends at First Trust that illustrates that point. The chart shows that in the aftermath of the 15 worst one-day declines in the history of the S&P 500, subsequent one-year returns were positive (double digits) in all but two cases. Over a three year period, the losses had been completely erased in all 15 cases.
While there is no guarantee that current events will follow past patterns, we firmly believe that over the long-term, patient investors will be rewarded by ignoring daily swings and focusing on their long-term strategy. It will take time for the true extent of the coronavirus fallout to be known, but ultimately the situation will stabilize. Until then, follow appropriate health precautions, stay calm, and stay the course. We will continue to monitor the situation and keep you updated.
Ethan Pollard serves as Vice President of Portfolio Management with Archetype Wealth Partners. He handles many of the research, trading and financial planning responsibilities at Archetype Wealth Partners, including the development of our economic and portfolio risk sensitivity models. Originally from Houston, Ethan currently resides in Chapel Hill, North Carolina with his wife Katie. Archetype exists to help families thrive across generations.
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