Learning from the Ups and Downs of the Stock Market

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The S&P 500 Index (S&P 500) closed at a level 2991.77 on May 26, 2020, representing a daily gain of 1.23%, thanks in large part to renewed optimism on economic re-openings and the potential for additional vaccine candidates from the likes of Novavax and Merck. As it stands now, it looks like the low close for the S&P 500 in 2020 year-to-date (YTD) is 2237.40, which occurred on March 23, 2020. These two S&P 500 data points mean that the S&P 500 has rallied nearly 34% off of its March low. However, just as the coronavirus crash did not follow a straight trajectory downward, the ensuing rally has not followed a straight trajectory upwards – quite to the contrary in fact. Consider the trading activity of the S&P 500 Index in 2020 below through the close of business on Monday, May 26, 2020.

In summary, of the 100 trading days thus far in 2020, 53% have been “up days” while 47% of them have been “down days” and the % magnitude of the daily changes have been significant at times. As evidence of the extent of the whipsaw volatility that has taken place in the stock market thus far this year, consider that 43% of the time the market has moved by more than 1.5%; up or down, in a given day versus the prior trading day.

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The line graph below of the daily closes of the S&P 500 between December 31, 2019 and May 26, 2020 will show the roller coaster ride that investors have been on in 2020 even better.

S&P 500 Index Daily Close Levels 2020 YTD

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It should also be noted that despite the current rally off of the March 23, 2020 low, the S&P 500 Index still remains approximately 7.4% lower than its closing level of 3230.78 on December 31, 2019. As a result, an additional rally of 7.9% from the close on May 26, 2020 would be needed to bring the S&P 500 back to flat from where it began 2020. That rally, if it were to occur, would likely follow a similar bumpy path as the days of heightened volatility are likely not behind us.

In our view at SmartTrust®, all of the data above can serve as a helpful reminder to investors of the importance of time in the market and the dangers of trying to time the market when navigating these types of volatile markets. Trying to successfully time when to exit and then re-enter the market is often an exercise in futility and could result in missing out on some of the best “up days” that a market cycle may have to offer. As a result, we recommend that investors work with experienced financial advisors to build and manage diversified portfolio strategies consistent with their objectives, investment timeframe and tolerance for risk in an effort to maximize each of their respective times in the market.

Disclosure: Data sourced from Bloomberg as of May 26, 2020. Performance data is price-based, not total return based, and does not include dividends. “Up days” indicate a closing level above the closing level of the previous trading day. “Down days” indicate a closing level below the closing level of the previous trading day. Past performance is not an indication of future results. You cannot invest directly in an index. The accuracy of this information is from sources we believe to be reliable but is not guaranteed.

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Disclosure: Hennion & Walsh Asset Management currently has allocations within its managed money program and Hennion & Walsh currently has allocations within certain SmartTrust® Unit Investment Trusts (UITs) consistent with several of the portfolio management ideas for consideration cited above.