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To put this figure into context, the widely followed index has averaged an annual total return, including dividends, of around 11% since 1980.
But history also shows us that stock market crashes and double-digit percentage corrections are commonplace.
Although some level of inflation is expected in a growing economy, the 6.2% increase in the Consumer Price Index for All Urban Consumers in October marked the largest jump in 31 years.
Should that happen, growth stocks would be in big trouble — and so would the S&P 500, which has relied on growth stocks for most of its gains over the past 12 years.
But every so often, it’s impossible to ignore how the actions in Washington, D.C., can affect the outlook for your investments.
We’ll also be navigating our way through midterm elections in early November, and politicians could be embroiled in another debt-ceiling debate near the end of 2022.
In recent years, the division in ideology between America’s two dominant parties, Democrats and Republicans, has widened, and finding middle-ground solutions has, at times, seemed impossible.
In May, the emergence of the delta variant of the SARS-CoV-2 virus that causes COVID-19 briefly sent investors running for the hills.
Variant variance describes how, rather than having a unified approach to tackling COVID-19 spread, we’re witnessing a hodgepodge of campaigns and restrictions globally.
Margin debt describes the amount of money being borrowed from brokerages with interest to purchase or short-sell securities.
Dating back to the beginning of 1995, there have been only three instances where margin debt climbed at least 60% on a year-over-year basis, according to data from the Financial Industry Regulatory Authority .
Over the past couple of years, the cryptocurrency market has run circles around the S&P 500.
If the crypto market, which is dominated in market cap by a handful of names, were to undergo a significant reversion, the capital retail investors have been bouncing between digital currencies and volatile/momentum/meme stocks could partially or fully dry up.
As a reminder, in November, the Federal Reserve’s “Financial Stability Report” cited the actions of retail investors in meme stocks as a potentially destabilizing factor for the stock market.
But since the Great Recession ended, low lending rates and a dovish central bank have rolled out the red carpet for growth stocks to thrive.
If the Fed does raise lending rates faster than expected and holds to its word of reducing or eliminating quantitative easing measures, access to cheap capital is going to diminish for growth stocks.
If growth rates slow, it becomes a lot tougher for Wall Street and investors to justify paying 50 times sales for a cloud services company or 35 times revenue for a cybersecurity stock.
Likewise, there have been either one or two declines of at least 10% within 36 months following each of the past eight bear-market bottoms, dating back to 1960.
Based on the above figures, we’re seemingly due for both a natural correction to the downside, and a hiccup in bouncing back from a bear-market bottom.