After getting off to a blistering start in 2018, stocks cooled off this week, with the S&P 500 falling 3.85%, its worst weekly decline since January 2016. The extended period of calm that we’ve grown accustomed to is over.
The S&P 500 had been within 3% of an all-time high- even on an intra-day basis- for an incredible 202 straight days. This is almost twice as long as the second longest streak which occurred from 1995 to 1996. The streak ended on Friday, when the index fell 3.93% from its recent highs.
Jack Bogle likes to say “the stock market is a giant distraction to the business of investing.” The chart below is a good visual to support this statement. Friday was the seventeenth -2% day for the S&P 500 in the last five years. Focusing on the day-to-day is a really good way to lose sight of the long-term trends, or why you’re even investing in the first place.
The S&P 500 is still up 3.3% through the first five weeks of the year, which even the most brazen bulls should be cool with, considering that stocks were up 20% in 2017 and the last time they had a down year, the iPad had yet to be invented.
It’s funny how stocks can go up for years and break all sorts of records, and then we all flip out when the pullback we’ve been begging for finally arrives. But if we weren’t overreacting, we wouldn’t be human, and that’s what makes markets so fun and interesting and scary and exciting.
Whenever we have big down days and it seems like the bull market is on its last legs, I remind myself of this line from Martin Luther King: “Even if I knew that tomorrow the world would go to pieces, I would still plant my apple tree.”
Michael Batnick is a managing partner at Ritholtz Wealth Management. He is the co-host of Animal Spirits, What Are Your Thoughts, and The Compound and Friends. For disclosure information please see here.