In this episode of "Coffee with Waymark," we dive into the recent market volatility observed on August 5th, where the Dow Jones experienced a near 1,000 point drop, continuing a trend from the previous trading day. We offer a historical perspective on market fluctuations since 1980, illustrating that despite the stark downturn, such movements are within the historical norm.
Key Points Discussed:
Recent Market Drop
Historical Perspective
2024 Market Behavior
Election Influence
Transcript:
Hi and welcome to another Coffee with Waymark. Today's episode is going to be on market volatility. Today is August 7th. On August 5th, which was Monday, we saw an almost 1, 000 point drop in the Dow Jones and that came after a Friday which was just as bad and led to a very rapid change in the S&P 500 where the S&P 500 at the end of the trading day, Monday August 5th was down approximately 10 percent from its all time high. So people started thinking about recession and slowing down and all sorts of negativity that we have been used to thinking about anytime we talk about the stock market. Today is going to be a little bit of a pep talk day for me.
Ultimately, what we're seeing with the market, it dropping about 10 percent from its all-time high, is not out of the ordinary. In fact, it's actually quite common, and that's what I'm going to show you today.
So let me start sharing my screen. So what you see here is a lot of data. And ultimately, what this is pretty much showing is the performance of the S&P 500 since 1980.
And so this is 44 years of data. And as you can see, the gray bars are how the S&P 500 performed over a calendar year from January 1st to December 31st. And so as you see, 33 out of 44 years, or for those keeping record about three quarters of the time, the stock market has been positive on a calendar year basis.
However, the red dots for each of the years, is showing how poorly the market performed at any one point during that calendar year. And so what you see here with the U.S. stock market and up until 2024. Actually, it's specifically June 30th ‘24, is that the market as of June 30th is up 14% and the worst it's done is negative 5%. But if you look at all the other times with the market, the average is an intra year drop of about 14%. So even with the recent volatility that we've seen over the last several days, has been really jarring because the market has been for all intents and purposes a pretty calm market in 2024 And to suddenly see a pretty rapid 10 percent drawdown is pretty shocking - It still relatively speaking is within the range of average and so again, don't want to promise anything.
Who knows what will happen? Right now what's really spooking the market is that I think a lot of investors are thinking that the Fed is acting a little bit too slowly with dropping rates and they've pretty much signaled that they're going to drop rates in September. Some people think they should have done it sooner and I think that's what's actually the main catalyst to what's going on with the market right now. Who knows what will happen if it turns into a snowball effect? We could see pretty dramatic drops in the last quarter of the year, especially around the presidential election where things tend to get a little bit more volatile.
But just where we stand today, This is an average drawdown. So there's my pep talk for the day. No promises here and don't know what's actually going to happen. I don't have a crystal ball, but historically speaking, a 10 percent drawdown is actually a little bit on the positive side as the average drawdown in any one year is about 14.2%. So thanks for joining me today. And remember to be well and do good.
Brendan is the Managing Director for Waymark Wealth Management. He has extensive experience in comprehensive wealth management. His focus includes retirement planning, behavioral finance, investment portfolio construction, education funding, insurance & risk management, taxes, charitable giving, and estate planning. Brendan has an ability to take clients' complex visions and distill them down to simple action plans, helping them move from where they are today to where they want to be tomorrow.
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The opinions voiced in this video are for general information only and are not intended to provide specific advice or recommendations for any individual.
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