The stock market has gone straight up since March of 2009. An investor who had the courage to buy stocks on March 9, 2009 has enjoyed an average annual return of 19.16% and a cumulative return of 336%! A $10,000 investment on that day is now worth $43,602. During this historic run the stock market hasn’t had a down year. 2009 was the best year with a gain of 67.8% and the worst year was 2015 with a modest gain of 1.38%. Has this run been pure bliss?
During this epic run the stock market has fallen 45% of the time with the worst one day drop of 6.5%. The market also experienced several down days of 2%, 3%, or 4%.
Let’s look at a few of the down days that occurred during this historic rise.
- October of 2009 the market fell 5.54%.
- January of 2010 the stock market fell 5.17%.
- May of 2010 the stock market fell 7.81%, followed by an 8.79% drop in June and July and a 4.18% drop in August.
- July and August of 2011 the stock market fell 17.12%.
- September of 2011 the stock market fell 7.02% and through November it dropped another 10.07%.
- April of 2012 the stock market fell 7.97%.
- August of 2013 the stock market fell 4.7%.
- January of 2014 the stock market fell 5.11% and in April it dropped another 4%.
- September and October of 2014 the market fell 7.5%.
- August of 2015 the stock market fell 11.68% and in September it dropped another 5.8%.
- January of 2016 the stock market started the year with a drop of 8%.
The investor who didn’t sell during these market drops was rewarded with above average market returns. The investor who sold during these down days missed out on an opportunity to realize historic returns.
The market experts are currently calling for a stock market pullback because it’s overvalued based on a few metrics like the CAPE ratio. The CAPE ratio is the Cyclically Adjusted Price Earnings Ratio developed by Robert Shiller. The CAPE ratio is currently 29.66 and has only been at this level twice before: 1929 and 1999.
The stock market, experts, and commentators will give you plenty of reasons to sell your stocks. Should you listen to the noise? My recommendation is to focus on your goals and don’t let the market shake you from your game plan. The stock market has been rising and falling for centuries but the long-term trend has always been higher. You’d be wise to stay the course and let history be your guide.
Immediately Jesus reached out his hand and caught him. “You of little faith,” he said, “why did you doubt?” ~ Matthew 14:31.
Bill Parrott is the President and CEO of Parrott Wealth Management, LLC. For more information on financial planning and investment management, please visit www.parrottwealth.com.
August 6, 2017
 Morningstar Office Hypothetical Tool.
 Yahoo! Finance – 3/9/2009 to 8/4/2017.
 https://seekingalpha.com/article/4085454-shiller-cape-ratio-misleading-right-now, Geoffrey Caveney, July 3, 2017.