Intra-year volatility plus a market update

As I type this, biotech firm Moderna announced positive news this morning regarding their vaccine trial, and that news looks to push this market comeback even further as we open markets today. We have seen quite the resurgence in equities since the March 23 low in the S&P 500. You'll see that "comeback" highlighted on the YTD (year-to-date) bar in the graph below from J.P. Morgan Asset Management, which shows annual lows each year for the S&P 500 (red dots) while also showing that year's final return (gray bar). The graph shows each year from 1980 until now.

Year-to-date as of 5/14/2020 it shows S&P 500 down 34% at it's low, and now down only 12% for the year (returns since 5/14 plus another 2+% positive as of this morning would put the total drop for 2020 in the single digits).

The first thing I hope you'll also notice is this: while the drawdown we had in equities was both steep and severe, the idea that stocks will experience intra-year volatility is not a new phenomenon.

What I also hope you'll notice is that perhaps there is a case to be made that a broad-market index like the S&P 500 is not the most efficient way to be invested in equities. As an advisor, part of my job is to find rewarding investments that can help mitigate this intra-year volatility. We know that the only way to realize a loss is to sell. But even when we behave correctly during drawdowns and refuse to panic, we know that those drawdowns can be a serious drag on long-term returns.

As a portfolio manager, my job is to work hard to minimize these drawdowns while also helping you persist through them as an investor guided by history and data. As it relates to this current market environment, investors who have held steady to their investment plan have (fairly quickly) been rewarded for doing so.