The New Year brought volatility back to the stock market. The S&P 500 fell -3.5% while foreign stocks, as measured by the MSCI EAFE, lost -4.0%. It was the worst month for both indices since May 2012.
Not only was 2013 a very profitable year for stocks, but it was also a very mild one in terms of volatility. The largest pullback the S&P 500 experienced during the course of the year was -5.8% in May and June, although the MSCI EAFE managed a -10.3% correction during the same time period. Additionally, both indices closed last year quite strongly with four consecutive months of gains and total returns close to 14% between September and December. A small correction like this one is healthy for the overall uptrend as it prevents the market from moving too high, too fast—a scenario which can create significantly overvalued conditions that increase the chances of a severe correction or bear market…
Please watch the video below for our complete Market Analysis.