The S&P 500’s rolling two-year rate of change recently hit the 95th percentile, a historically rare level of growth. While this indicates strong market momentum, history shows that such rapid gains are often followed by a cooling-off period. Exceptions, like the mid-1990s, are rare, and sharp pullbacks are more common once this threshold is reached.
Staying invested during strong markets is important, but it’s equally critical to acknowledge the heightened risks that come with rapid gains. Proactive risk management is key to successfully navigating both market surges and potential downturns.
Caution Amid the Momentum
- We believe the preservation of capital is key to consistent, long-term investment success.
- Our investment approach is grounded in economic theory and backed by quantitative analysis.
- Managing drawdown risk is a pillar from which we build our portfolios.
60-Second Breakdown: November 18, 2024
Redwood Senior Analyst Michael C. Sasaki, CFA® discusses recent market performance and explains this week’s chart.
