Given the selloff, on Friday I thought it would make sense to update this piece I sent out a while back. Last year was a historically calm year for the market and I would not expect that to continue going forward.
I don’t have a crystal ball, but the one thing I do know is that the market usually reverts to its mean behaviors. The average intra-year decline since 1980 is about -14%. Last year the largest intra-year decline was -3%. As the chart below shows, it should not surprise anyone to see the market have pullbacks in 2018 and most likely greater than -3%.
A pullback would do a lot to make the US markets more attractively valued than they are currently. If a patient investor expects these pullbacks, hopefully, it will be easier for them to stay the course when they occur.