Equities have continued to march higher early in 2018, following the strong finish to what was a terrific year in 2017. As of this writing (January 17th), the S&P 500’s 3.9% advance in the first 10 trading days is the ninth best start to a year in history. The S&P 500 advanced an average of 20% in the other 8 years of returns better than 2018’s start. Still, in EVERY one of those eight years, there was an intra-year drawdown of at least 7%, with an average drawdown of 13%. 14% happens to be the NORMAL yearly intra-year decline over the past 38 years. 2017 witnessed the smallest decline (3%) in over 20 years (see below) and while we at Fundamentum continue to like equities, it would be highly unlikely for 2018 to experience another year without pullbacks, so the simple message today is….let’s not forget that drawdowns are normal, healthy and likely!
The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations. Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk including loss of principal.
Sources: JP Morgan Asset Management & Strategas Research
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Investing involves risk including loss of principal. The investment returns and principal value of the portfolio will fluctuate so that the value of an investor’s account, when redeemed, may be worth more or less than their original value. No strategy assures success or protects against loss. The performance data quoted represents past performance; past performance does not guarantee future results. Asset allocation does not ensure a profit or protect against a loss. Investment return and principal value will fluctuate and an investors equity when liquidated may be worth more or less than original cost. Current performance may be lower or higher than performance information quoted above. Investment advice offered through Fundamentum LLC a registered investment advisor.