The latest Weekly Kickstart from Goldman Sachs helps put the current sell-off in perspective. While the last few weeks have appeared dramatic, by historical standards this hasn’t been anything all that special:
“The 15th S&P 500 correction of at least 10% since 1975 has shifted client conversations to valuation support. The current correction is 12% below the April high and modestly smaller than the 18% average of past corrections. We see support in strong earnings and past valuation bottoms but lower our 2011 year-end price target to 1400 and 2012 EPS estimate to $102 due to slower global GDP estimates from our global Economists.
The current S&P 500 correction is the 15th such pullback since 1975. The index stands 12% below the April 2011 high of 1364, so the drop is 620 bp smaller than the median correction of the past 35 years. At 97 days, the current episode is in-line with the average duration of past corrections.”
This is not to imply that the recent market decline hasn’t been nerve racking, but anyone who lived through 2008 likely remembers how quickly a market can collapse. And while this is certainly a time of fear, we’re certainly nowhere near a Lehman moment (though a collapse in Italy could get us there quickly).
Source: Goldman Sachs
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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