Friday, August 21, 2015

Zoom out

There is a saying for market observers who use charts as part of their analysis.  When in doubt, zoom out.  It is all too easy to be absorbed by the minutiae of investment information that tosses us around from one uncertainty to another.  Following a 300 point Dow drop yesterday it can feel like the end is nigh, the end is past or like the proverbial tennis shoe in the drier, it's just confusing chaos..

In the past twenty years investors have endured two mighty bear markets.  Various market pundits announced we've entered broad bear market territory.  Depending on ones constitution it is possible to think the worst is over and opportunities abound suddenly.  Maybe.  But first some visual perspective is in order.

Both the internet bubble and mortgage banking crisis make yesterday pale in comparison.  It is not necessarily too late for portfolio caution.  The chart below shows the past twenty years of the S&P 500, including yesterday up in the upper right corner.

Zoom out.  Add some distance.