So far, 2015 has not been particularly kind to the U.S. Stock Market. After starting off strong for the first few days of the year, the Dow Jones and S&P500 have taken a turn for the red. Almost instantaneously, the media raises fear about the market, capturing novice investors with headlines like, “Dow down over a 100 points, down 301 points earlier!” Well, yes, this is true, but what individual investors need to know is that you can not accurately predict the stock market’s future for the year based on 9 trading days.
After doing some research, I found an interesting fact that may explain why the stock market will not be in the hole for the remainder of 2015. Any investor who has paid attention to the market’s movement in 2014 can remember that it was a record year for both the Dow and the S&P. What not many investors will remember, however, is that the market started 2014.. get this… IN THE RED! The reason investors forgot is probably because the early-year weakness was hidden behind the wall of bulls, that ultimately won over in 2014.
In the chart below you will find the S&P500 for the year 2014, as well as the first few days of this year, 2015. I made sure to highlight the fact that the S&P went down about 5% in the first month of the 2014. And, what do you know, the same fear was present as it is now. There were numerous articles writing about the end of the bull market, and that 2014 was going to be a bear market. However, there were also articles like this one, here, that said to not pull the plug on U.S. stocks just yet. Who was right in the end? The bulls.
This year is no different. The S&P500 is down almost 2% for the year, and there is fear that THIS will finally be the end of the bull market. It will not be, however, as the fears will soon fade away as the market begins to pick up again, just like it did in the end of February 2014. Give the market time, as only the most successful investors will realize, a short-term sell-off will scare away speculators, but not long-term investors.
Capitalist Square 