Intra-year declines vs. calendar year returns

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From the J.P. Morgan Q4 2016 “Guide to Markets”

There are a lot of cool charts in the J.P. Morgan “Guide to Markets” but I like this one. It is easy to focus on annual returns. That’s how most places report things. Lots of popular data sources report that way.

But it also obscures that there are often big drops within the year. But things recover so you don’t see that volatility in the annual return record.

  • 8 out of the last 10 years have seen a -10% drop at some point in the year. But only one of those years (2008) saw an annual drop when everything was said and done.
  • In 2009 there was a -28% drop but the market ended up at +23% for the year.
  • In 2008 the market was down -49% at one point but ended up down “only” -38% on an annual basis.

Paying overly close attention to vagaries of the market isn’t good for you. It’s a bit like sausage I guess: you don’t want to see how it is made, just enjoy the end result.

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