Volatility is back in 2018

2017 was a very unusual year for the US stock market. Stock prices rose smoothly and steadily with very, very little volatility. 2018, on the other hand, started off with a bang, the best January returns in the last 31 years. Wow. But we have now experienced a quick and scary downward move of about 10%. So volatility is back in 2018. Does this mean the end of a good stock market return? Let's look at the chart of the S&P 500 over the last year for some perspective. First, we see the smooth uptrend of last year, the spike upward of this January and the roughly 10% downturn. But here is the key. As of now, the overall trend is still up.

The next chart shows the longer term history of up and down cycles, a full century. It is surprising to see how long each of these up and down cycles last. Upcycles marked in green, down cycles marked in red. Historically, these structural bull market cycles have lasted an average of 14 years. What's the takeaway? The short term volatility that we've just experienced is difficult and nerve wracking. However, stocks still appear to be on a longterm uptrend. Based on history, this uptrend should have a couple more years to go. We will be watching closely and keeping you posted. Thank you for your confidence in us here at GWP. See you soon.

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