Key insights
- The author believes a further 12% drop in the SPY, totaling a 20% decline, is unlikely given historical market reactions to similar events like wars and oil disruptions. They argue that such a drop would be disproportionate. However, they acknowledge market uncertainty, implying a slightly bearish outlook due to geopolitical risks and energy concerns already priced in.
I just sent this in response to my friend stating that he believes another dip, like last years, if not worse, is around the corner. What do you guys think?
“We shall see. It would take another 12% drop in SPY to equate to how much it dropped last year, it’s already down 8% this month and seems to be beginning to price in worst case scenarios like boots on the ground and continued oil/energy disruption. Another 12% drop (20% broad market decline in total) would be a very big deal and a very disproportionate drop compared to market declines caused by wars, oil disruption and inflation in the past. The market didn’t even drop that much following 9/11 and the outbreak of the war in Afghanistan, and that was also amidst the dot com bubble crash.
But what do I know. Anything is possible. If the market drops another 12% over this war I’d be clutching my pearls though.”