Big stock market sell-offs happen all of the time.
We’ve seen two violent sell-offs in the second half of 2014. The first came when the S&P 500 quickly tumbled 9.8% from its then all-time high of 2,019 on Sept. 19 to as low as 1,820 on Oct. 15. The second came when the S&P plunged 5.1% from 2,079 ion Dec. 5 to 1,972 on Dec. 16.
And yet, the S&P recovered those losses and then some.
Importantly, these big sell-offs occur during years when the markets head higher. Even the Black Monday crash of 1987 was part of a bull market.
“Despite average intra-year drops of 14.2%, annual returns [have been] positive in 26 of 34 years,” JP Morgan Funds’ David Kelly said.
Kelly offers this chart of intra-year declines that we think every investor should pin to their walls.
Bottom line: Sell-offs happen. And sometimes they’re big. But they’re normal, and they’re no reason to panic.
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