This is Average

The S&P 500 is experiencing its worst January through April going all the way back to 1970. It’s hard to believe then, that part of an unusual year is exactly average, at least so far.

Going back to 1950, the S&P 500 has had a positive annual return 56 out of 71 years, or 79% of the time. But as we know all too well, stocks don’t go up in a straight line. The no free lunch part of these gains are temporary declines that never feel that way in real time. The visceral feeling that we get in the pits of our stomach on days like Friday is the emotional price we pay for the upside. And that price is too high for many.

The average intrayear drawdown going back to 1950 is 13.6%. That’s exactly where we closed on Friday.

While it’s factually true that we are right at the average, there are all sorts of reasons why 2022 is anything but. We’re seeing stocks blow up left and right, and not just small ones. We’re seeing losses in bonds that we haven’t experienced in four decades. We’ve got inflation and the fed removing liquidity from the market. So yeah, on the whole, hardly average.

It’s a difficult environment for investors and it’s probably not going to get any easier. It’s not the smartest investors that will endure, but the most patient. Peter Lynch said “In the stock market, the most important organ is the stomach. It’s not the brain.”

When I start to feel nervous about the market I do two things, remind myself why I’m investing in the first place, and then I buy more stocks. On that first point, the money is for my family’s security, and not one, five or even ten years from now. I have zero doubt, absolutely zero, that earnings will continue to grow and stocks will eventually follow. We’ve got a hundred years of data to confirm it. So I’m not going to do anything to get in the way of my destination, regardless of how much pain I have to endure. I know that eventually* I’ll be rewarded.

*We’re not Japan

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.