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Stocks usually go up after really crappy months

The S&P 500 closed 2015 at 2,043. On Wednesday, it got as low as 1,812 reflecting an 11% plunge for the year.

While stocks are off of those lows, they are nevertheless deep in the red in what’s been a historically ugly start to the year.

“The S&P 500 is currently on pace to record its worst monthly decline since January 2009 and 11th worst month during the post war era,” BMO Capital’s Brian Belski observed. “Obviously this weakness has shaken investor confidence with some fearing that an end is nowhere in sight.”

Belski believes this will prove to be just a speed bump in what he forecasts to be a long-term, secular bull market. This is important for investors because historically, this is not a time to take money out of the market.

“[W]e examined S&P 500 performance following its 20 worst months during the post war era and found that, on average, performance tends to snap back rather sharply following such poor months,” Belski said. “For instance, the average gain for the S&P 500 during the 3/6/12-months following the 20 worst months is roughly 3%, 7%, and 15%, respectively.”

“More important, the index has almost never recorded a loss during these subsequent months,” he continued. “As a result, this is one data point that we believe reinforces our view that S&P 500 levels could rise by double-digits in percentage terms from current levels between now and year-end.”

So, if you’re exposed to the market and you’ve lost some wealth, the seasoned pros will likely tell you that now is not the time to dump stocks.

“Corrections are part and parcel of the investment process, they come and go, and it is imperative to take a deep breath and realise that what is most important for building wealth is not ‘timing’ the market but rather ‘time in’ the market,” Gluskin Sheff’s David Rosenberg once wrote.

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