Through Wednesday of this week, the S&P 500 was down 13.07% year to date. The MSCI All Country World Index was down 13.05%. Even bonds, as represented by the Barclays US Aggregate Bond Index were down 9.85%. Seemingly, everything is down. Well, everything but inflation, but I digress.
Should You Sell?
World stock markets have been in decline for the past 6 months or so. Not surprisingly, the lower we go, the more pessimistic we tend to be. Just this week, I have seen some analysts predicting that we are perhaps just halfway through this bear market with another 25% downside from here lasting until late in the year.
Let me just say that I have no idea what stocks will do today, next week, month, or even year. However, I can look to history to offer some guidance as to how to manage these unsettling (but, not particularly unusual) periods of volatility.
One Step Forward and Two Steps Back
In the past week, stock markets have whipsawed between rallying and selling off with at least two days of 3%+ gains in the NASDAQ being followed up with selloffs of 4-5% the next day. The recent behavior of stock prices has felt like a night on the dance floor at the Broken Spoke (but not in a fun way) with the market performing a Texas Two-Step dance of “One Step Forward and Two Steps Back”.