It’s been a wild ride the last couple of days in the Indices, with the S&P 500 futures contract down a little more than 13% from the highs (2126.25 set back in May 2015). However, the majority of the losses came in the last 5 days, seeing the S&P lose 272 points and the Dow Jones losing nearly 2,300 points. Anytime the market moves in an extreme manner, whether it’s on the way up or on the way down, it raises many questions from investors and fear begins to set in. Recently we’ve heard questions such as, is this another market crash like 2008? Is this a Flash Crash 2.0? Are we entering a Bear market? The answer is “none of the above…”
The S&P 500 has gone about 36 months without a correction of at least 10%. The chart below illustrates the S&P Bull market we have been in since the beginning of 2012.
If you notice, the steady incline over the past few years has been quiet and consistent, returning over 40% in the last 4 years. Market corrections of approximately 10% happen from time to time and does not change the overall sentiment of the market. Although a sudden market selloff is never easy to swallow, this market correction was much needed and healthy for the market moving forward. Recent news of the Chinese stock market, and Crude Oil prices taking a dive remain important to global economic news, however they will not contribute to a long term sell off.
What this Means Moving Forward
Although there is always the slight chance the market could continue to sell off and change its course of the past 36 months, we feel this is not the case. We feel the market will continue to rally going into the Q3 and Q4 of 2015, unless the Fed decides to raise rates sometime later this year, which could throw a wrench into the whole equation. Does this market correction foreshadow things to come in the near future? Sure, however, something tells us that we will need some sort of major economic event or news in order to put an end to the bull market we are currently in.