Friday, 12 June 2020

Sunshine Follows >5% Declines - Usually

Who needs baseball, I rhetorically asked at the end of my last post. After today's beating in the markets, it seems that I do. Some slow and steady T-Bone profits are far easier on the psyche than the losses incurred by a 5.9% one day loss in the markets.

This was only the 28th time since 1952, when the S&P 500 converted to a five-day trading schedule, that the index has tumbled by at least 5% in a day with five of those declines have been in the past three months alone.

The good news though is that Market Watch reports that "declines of this magnitude have historically been followed by sizable rebounds in the days, weeks and months to follow".

Three of those days were followed by another 5% or greater loss, but it's encouraging that the last time a Friday saw a decline of this size was back in the last millennium.   
Investing is a game of endurance, with the biggest gains accruing to those that can most withstand the pain.
Context is everything of course, and the S&P 500 is still up 34.2% from March 23rd, a much more positive way of looking at things than that it is 11.3% off its high.

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