AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
_03_13_2025_03_21_46_386729.jpg)
Highlights
- Recent market declines align with historical patterns.
- Long-term investors benefit from a broader perspective.
- Past performance shows markets tend to recover over time.
Over the past month, the stock market has faced notable declines, stirring concerns among investors. The S&P/ASX 200 (ASX:XJO) and the S&P 500 (SPX) have both experienced downturns, influenced by tariff-related uncertainties and global economic concerns. While market fluctuations may seem unsettling, historical data suggests that these trends are not uncommon.
Understanding the Recent Market Decline
The ASX 200 (ASX:XJO) peaked on February 14, followed by a 9% decline. Meanwhile, the S&P 500 (SPX) began its downturn on February 19, experiencing an 8.9% drop. This has led to portfolios reflecting losses that can be concerning, especially for those unaccustomed to market volatility.
However, stepping back provides a clearer picture. The ASX 200 (ASX:XJO) is currently at levels last seen in August 2024, while the S&P 500 (SPX) is at September 2024 levels. Essentially, these declines have erased approximately six months’ worth of gains—certainly not ideal, but not entirely unexpected either.
Market Corrections Are Normal
Historically, the S&P 500 (SPX) has seen corrections of 10% or more approximately every 1.2 years. This means that market dips, such as the one we are experiencing, align with historical trends. Investors often face periods of volatility, but history shows that the market tends to recover over time.
Looking at the Bigger Picture
Taking a longer-term view provides further perspective. Over the past 12 months, the ASX 200 (ASX:XJO) has seen minimal movement, rising just 0.75%. However, this figure does not account for dividend earnings, which typically range between 3-4%. Factoring in these dividends, long-term investors have still seen positive returns.
Meanwhile, the S&P 500 (SPX) has delivered an 8% gain over the past year, even after factoring in the recent decline. Market fluctuations are common, and the recent downturn can be seen as a reversion to the mean after strong prior-year performance.
Five-Year Market Performance
For those with a long-term investment strategy, history provides reassurance. Over the last five years, the ASX 200 (ASX:XJO) has gained over 40%, excluding dividends. The S&P 500 (SPX) has more than doubled in the same period, reflecting the resilience of the market over time.
Final Thoughts
While market movements can be unpredictable, the broader trend favors long-term growth. Investors who maintain a steady perspective and focus on long-term financial goals are more likely to see positive outcomes. As history has shown, markets tend to recover, making patience a key strategy in times of uncertainty.
