Weekly Market Update May 26, 2023
Dow Jones Industrial 33,093.34 -1.0%, S&P 500 4,205.45 +.32%,
Nasdaq Composite 12,975.65 +2.51%, US Ten Year 3.79%, Crude Oil $72.75
Regular readers of this space may recall my May 12 Weekly Market Update, where I discussed the price pattern of the S&P 500, specifically the “Ascending Right Triangle” pattern, with the index experiencing a series of higher lows while trying to break out above of the 4,150-resistance level. This may have happened today, with the index closing at 4,200. This is a product of the hype surrounding Artificial Intelligence, the even chance that the Fed will not raise interest rates at next week’s FOMC meeting, and the seeming resolution of the federal budget deficit. The May 12 Update may be reviewed here.
Volatility will of course remain; it is ever-present, is the essence of any free market in goods or services, and without it stocks would not provide opportunities to make timely purchases and sales. But it can be disconcerting, especially when the current trend of the market is down. But down markets do not last forever, and stocks end higher three years out of four; this makes sense, as stocks should reflect the overall economy, which does grow most years. This is shown in the chart below.
Certainly the “down” years are unpleasant, even alarming, but notice that over 86 years they were down more than one year in a row only three times. More importantly, over five years the picture gets brighter for long-term investors, with stocks higher over nine times out of ten five-year periods.
For ten-year holding periods stocks were up 97% of the time. The lesson here is two-fold: Stock volatility tends to “even out” over time, and the general tendency of stocks over time is to trend higher. So don’t let short periods of high volatility sway you from your long-term investment goals.
Have a Wonderful Week