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Posted on 17 March 2011 | 6,077 views

Worst S&P 500 3 Month Sell-Offs With Rebounds

Since January 3, 1950 the Standard and Poors 500, “S&P 500” has had 6 large sell-offs which led to subsequent 12 month returns larger than the original sell-off.

As history demonstrates, some of the worst short-term losses were followed by substantial rebounds. In many cases, investors would have been better to remain fully invested during the entire period — enduring short-term losses without missing the rebound.

3 Month Periods Ending …

September 1974 ended a 3 month decline of 25% which led to a subsequent 12 month return of 38% in the S&P 500 index. The oil crises of 1973-1974 served as bookend for a decade that saw rampant inflation and slow economic growth, an unprecedented combination that led to a new term being coined, Stagflation.

June 1962 ended a 3 month decline of 21% which led to a subsequent 12 month return of 31% in the S&P 500 index. The month earlier, the stock markets experienced their first “Flash Crash” on May 29, 1962.

June 1970 ended a 3 month decline of 18% which led to a subsequent 12 month return of 42% in the S&P 500 index. During the 1970s business conditions and the economy began to disappoint the expectations that Americans had built up during the post-World War II years.

September 2002 ended a 3 month decline of 17% which led to a subsequent 12 month return of 24% in the S&P 500 index. The stock market downturn of 2002 (some say “Stock Market Crash” or “The Internet Bubble Bursting”) is the sharp drop in stock prices during 2002 in stock exchanges across the United States. After recovering from lows reached following the September 11 attacks, indices slid steadily starting in March 2002, with dramatic declines in July and September leading to lows last reached in 1997 and 1998.

October 1990 ended a 3 month decline of 14% which led to a subsequent 12 month return of 34% in the S&P 500 index. Back in 1990, the banking system was in crisis and the economy was trending toward recession. The primary driver of the economic slowdown at the time was a deterioration in consumer spending and a sharp rise in oil prices following the Iraqi invasion of Kuwait.

October 1957 ended a 3 month decline of 13% which led to a subsequent 12 month return of 30% in the S&P 500 index. A recession which was eight months long, it lasted between August 1957 to April 1958. It was caused by contradictory monetary policy.

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