Radnor News / Blog


posted by: Radnor Financial Advisors

Market Sell Off

As you may be aware, stock markets have experienced a sell-off over the past few weeks, with the S&P 500 declining over 9% since October 3rd.  Recognizing that short-term declines of this magnitude are always uncomfortable, and while it looks like the markets may stabilize today, there could be additional volatility going forward.

The current sell-off feels similar to the decline back in January/February, as markets have reacted to the rise in Treasury Yields (the 10-year yield rose above 3.2%), wage and employment data, and concerns about global growth and unease from trade war tensions.

While stock sell-offs are unsettling, they are not uncommon.  Declines in the 10% range occur nearly once a year on average.  Moreover, as shown in the chart below, market declines of varying magnitudes occur every year, with an average intra year decline of 13.8% over the past 38 years despite positive returns in 29 of these years.  The short-term volatility associated with stocks is a primary reason that equities outperform cash and bonds over time.

Investors should focus on their long-term investment strategy and avoid overreacting to short-term market movements.


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