Midterm Years
We are in a midterm election year, and the stock and bond markets have been doing their best to shake out the weak hands. The US stock market peaked on January 3rd, and has declined -14% since. (S&P 500 index, source: Factset)
Many investors forget that double-digit declines in stocks during a year are actually normal. After only one -5% pullback all of last year, the markets are reminding us of that truth in 2022. Since 1980, the average correction in any year is -14%.
And historically midterm years have been especially rough, down more than -17% on average peak-to-trough. The good news is that historically, a year later, stocks have gained more than +32% on average. Great illustration of this from LPL Financial below.
Source: LPL Financial
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