Coronavirus? Putting the February Volatility in Perspective

Conventional wisdom says the stock market takes the escalator up, and the elevator down and from our perspective, the fact that we are in the midst of a 10% decline is not all that shocking given a rise of more than 30% in stocks last year.

 We’ve been here before:

As you can see from the table below, the S&P 500 is currently trading at approximately 3015 (as of 2/27/2020), which is the same level that it was trading during last summer (7/12/2019).  If you pull the lens out a little further, you can see that not too long ago, the S&P 500 traded around 2500 on January 1, 2019, and under 2000 on January 1, 2016.  What that indicates is that there have been substantial gains in a relatively short period of time.

We speak often about the idea of “mean reversion” which has the effect of pulling markets back down when they get too hot, and vice-versa. 

At today’s S&P 500 level, the stock market still has an annualized gain of greater than 10% since 2016!

While the auspice of global pandemic should certainly give investors pause, after a 30% rise in stocks in 2019, a continuance of that meteoric pace was not to be expected.  Now that we have seen valuations return to mid-2019 levels, we are opportunistically seeking to buy back into stocks at better entry points.  We continue to be conservative in our re-entry approach.  Despite the correction, we remain optimistic while unemployment remains low and the economy continues to chug along.  We remain vigilant and proactive.