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What a Week it Was!

Drew Harper, CFA, CFP®
March 3, 2020

Well, last week was interesting, wasn’t it? Between the coronavirus spreading, polarizing presidential debates and the S&P 500 dropping nearly 10%, conversations in the office and at home have been pretty gripping.

At least the weather in Colorado has been sunny, and the big dance (college basketball) is nearly here. It’s the little things, right?

While some very recent events are specific to 2020 happenings, we would define the market's overall recent performance as normal. History has shown us that over the last 40 years, the average intra-year decline is 13.8%, according to research from JP Morgan.

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management

With all the red in the market, it certainly hasn't felt like a great week. In fact, we've been in a very low volatility period since October 2018, which is illustrated below using VIX® Index.

Source: Yahoo Finance.  Data as of 2/28/2020

You'll notice the index rose quickly after the roses dried out and all the chocolate was eaten from Valentine's Day.

Taking a look back at the market history since 1949, we can see that market declines occur often in different intensities. American Funds researched the history of declines and determined they have been regular.

Source: RIMES, Standard & Poor's

Stay the Course

As always, we share all of this with you not to scare or alarm you, but rather to provide a reminder that market declines are normal. Our advice is to remain focused on your long-term goals, stick to your plan and reach out to your Financial Consultant if you would like to talk, whether that’s about the market or college basketball. We’re open to both.

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*Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2019, over which time period the average annual return was 8.9%.

1. Assumes 50% recovery rate of lost value.

2. Measures market high to market low.

3. The average frequency and average length rows exclude the most recent decline in December 2018 because the 50% recovery of lost value occurred after 12/31/18.

Any opinions are those of Drew Harper and not necessarily those of Raymond James.  This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.   The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The CBOE Volatility Index® (VIX® Index®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.


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