Content provided by Sierra Morris – Jr. Investment Research Analyst

The recent sell-off has been alarming for investors. However, is this move over a short period of time warranted in causing so much concern? We consistently tell investors to focus on the long term when looking at their investment portfolios, so let’s take a look at history’s worst returns by time horizon and see how scary things may be.

In the chart below, I have collected data from the Russell 3000 (all domestic equities), the S&P 500 (large-cap domestic equities), the MSCI ACWI ex. US (global equities excluding the US), and also for the Barclays Aggregate (bonds). What this data is reflecting below is the absolute worst return for each time frame dating back to 1979, and then annualized.

So what does the chart show us? First, take a look at how much less volatile bond returns have been – the worst annualized returns have historically been about half of the equity markets. The bond returns also move into positive territory on a three year time frame, which is much sooner than the equity markets. Next, take a look at international equities – historical worst returns here really haven’t been far off from domestic stocks. I think many people would expect the worst returns from a global index to be much lower than those domestically. Now for the big takeaway – while the annualized returns from short time periods look downright scary, focus instead on the long term, just like we tell our clients. With a time horizon of 15 or 20 years, even the absolute worst returns of each index (through both the tech bubble and the financial crisis in 2008) are still positive.

So, just like the wise Warren Buffett said: “Over the long term, the stock market news will be good.”


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The S&P 500® Index is an unmanaged composite of 500-large capitalization companies.  This index is widely used by professional investors as a performance benchmark for large-cap stocks.  The Russell 3000 Index is an unmanaged index considered representative of the U.S. stock market.  The index is composed of the 3,000 largest U.S. stocks. The MSCI All-Countries World Index, excluding U.S. (ACWI ex US) is an index considered representative of stock markets of developed and emerging markets, excluding those of the US. The Barclay’s Capital U.S. Aggregate Bond® Index measures the performance of the total United States investment-grade bond market. The Barclay’s Capital 1-3 Month U.S. Treasury Bill® Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value.
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