Most stock and bond indexes trended higher last week, as investors seemingly shrugged off concerns over both inflation and the Delta variant and viewed Monday’s pull back as an opportunity to buy the dip. The positive week continues a trend that’s been in place for the entirety of 2021 – the S&P 500 index (a proxy for large-cap US stocks) has yet to experience a 5% correction. In fact, you must go back to early November of last year to find the last time that has occurred. At that time volatility spiked upward and the S&P 500 retreated more than 8% from its prior high (see arrows below).
For context, the average intra-year decline for the S&P 500 index since 1980 is more than 14%[1]. While this relatively calm climb upward in equity markets this year has been wonderful for investors, it is important to remember that this run has been somewhat atypical. As a result, we encourage investors to revisit their financial plans and, if needed, reduce equity exposure to target levels if they find themselves overweight stocks.
[1] JP Morgan Guide to the Market, July 22, 2021