The Return of the Bear
Let’s go way, way back in time and look at the stock market. I’m talking about that time long ago when the S&P 500 had dropped through the floor and had “crashed” down to 1863. Now to understand the significance of the “crash”, you must remember that--back even farther--the S&P 500 stood at about 2011. This means that the S&P 500 had dropped more than 7%.
You may be wondering how long ago it was when it appeared that the Bear had eaten the lunch of the Bull. The high point was in mid-September of this year, while the low point was in mid-October. One whole month separated these two events. If you were listening to News TV, which I suggest you don’t do, you would have heard all kinds of doom and gloom. This past Friday, a little more than a week after the big “crash”, the S&P 500 was 1965 and suddenly all was looking lovely and well again. This rise of about 5.5% in 6 business days represented a turnaround for the stock market. As I noted in my July Newsletter and again in several blogs, a correction of 10% is a normal change for the stock market.
What we need to focus on, as long term investors, is the long term. In my simple way of looking at things, I look at this year and ask, “Is it better than last year?” In this case the answer is yes. Then I ask, “Will next year be better than this year?” In my estimation, the answer is yes. Therefore, be aware of what is going on but don’t let it frighten you. There will be more sunny days ahead!
Posted October 28, 2014 at 10:12AM.