The quarterly ritual of reviewing investment statements is upon us and I expect many will be disappointed with the performance of their stock allocation. 

The S&P 500 had its worst quarterly performance since the fourth quarter of 2008, losing 11.43%.  Such a terrible quarter makes it easy to forget that the S&P 500 returned 46.57% in the previous four quarters.  You also have to remember that before the second quarter, the S&P 500 was up 76.84% from the market low.  Considering these massive gains, a period of market consolidation should be expected.

To help calm our emotions and prevent bad investment decisions, let’s step back even further.  Take a look at the charts below, which show stock returns after inflation.

As you can see, stocks are very volatile over a one-year period, but are much smoother over longer periods of time.  Compared to the one-year returns, the three-year returns deviate less from the average return (represented by the red line), and the 10-year returns hardly deviate from the average at all. 

I find this visual soothing after a rough quarter and believe it can help keep your head in the game for the long run.

Peter Lazaroff, Investment Analyst

www.acrinv.com