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Q: I’m a little concerned about the big decline. Is more to come?
A: As always, the correct answer is “We don’t know.” But that is pretty normal. Brad McMillan provides some very recent historical context:
“Let's look back at history because we have seen this before. In April, the S&P 500 was down more than 5 percent—and bounced back. In July through October of last year, the S&P 500 was down more than 10 percent—and bounced back. And in August through October 2022, the S&P 500 was down almost 16 percent—and bounced back. In every one of the past couple of years, we have seen a substantial pullback in July or August, only to see markets rebound. Although this does not guarantee future results, this looks like the latest iteration of something we have seen multiple times before.”
The improvement on Tuesday and Wednesday would bear this out, for now at least. But the most important lesson is that market pullbacks are normal. Without risk, there would not be an appropriate reward for participating in the markets.
Brad concludes his post:
“Pullbacks are normal, but every time is scary. And every time we need to pay attention. But in the end, although there are real risks out there, right now everything is still fairly normal, in our view. We will be keeping an eye on things, but the best course of action remains simply this: keep calm and carry on.”
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