Monday, September 28, 2015

2011 versus 2015

I’ve suggested ad nauseam of late that the present correction was long overdue, in that it’s been 4 years since the major averages have seen a 10+% decline.

This morning Bespoke Investment Group offered a comparison of the present correction to 2011’s. Fascinating that, at yesterday's close, the S&P 500 was down 8.60% on the year, while on the same day in 2011 the S&P was down 8.47% on the year.

The market peak to this point, however, was (per the chart below) a bit more dramatic in 2011. And, peak-to-trough, the S&P was down 19.39% that year. Should the August low for this year hold, the peak-to-trough correction will amount to minus 12.35%. As I suggested in this morning's audio, however, corrections tend to test, and often penetrate, the initial low---as did (per the chart) 2011's.

S&P 500 2011 vs 2015

In terms of how 2011 ultimately played out: On this day 4 years ago the extremely nervous market was a mere 6 days away from bottoming---a 6 days that saw the average decline another painful 4.2%. The ensuing rally brought the year back to about even and, start to finish, saw the S&P 500 increase by nearly 94%. Thank goodness you didn’t panic during the decline, right?

My purpose folks is in no way to promise that the present correction is near its end, nor that it may not morph into the next bear market. I simply find the similarity to 2011 interesting, and, more importantly, I want to drive home my continuous point that corrections are common and that they ultimately set the stage for healthier moves down the road. The same can be said for bear markets, they just go deeper and take longer.

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