(I give credit to a Motley Fool article called “Party like It’s 1987” written May 12, 2019 for much of the information in the following article. Also, I am not making any recommendations to buy, sell or hold any particular positions.)
Through April 30, the S&P 500 index had earned 18.3%. This is the best stretch for the first four months of the year since 1987! Interestingly, most of us will not remember 1987 for the impressive performance of the S&P 500 in January. Rather, we tend to remember the 20.5% drop on October 19 – which remains the biggest one-day decline in the history of the S&P 500 index. Even with the decline, the S&P 500 ended up 5% for the year in 1987.
Looking back even further, Ryan Dietrich of LPL Financial told CNBC that, until now, there have been only four years since World War II when the market earned 15% or more in the first four months. Specifically, those years were 1967, 1975, 1983 and 1987. However, please note that the months between May and October have been really volatile in the same years.
Wall Street has an old saying that states, “As January goes so goes the year.” Historically, when stocks are up in both January and February, the historical odds of the happy outcome are even better. According to LPL Financial, 93% of the time since 1950, the S&P 500 has made money in the final 10 months during the years in which both January and February were positive.
To provide even more positive news, through April of this year, mid-cap stocks are up 21%, small caps are up 16% and international stocks have returned 14%. The NASDAQ, which also reached an all-time high in April, is up 22% for the year. This is largely due to the continued dominance of technology stocks.
The S&P 500 is now worth more than 11 times its value at the end of 1987. In spite of the recent volatility, which has returned to the U.S. and international markets, remember that the “buy and hold strategy” has proved itself over time.
To summarize, historically speaking, we should expect volatility from now into September or October. Hopefully, we will enjoy a positive year-end. (Of course, no one knows what will happen and past performance does not predict the future.)