By the end of trading on Friday, the selloff had worsened and we were looking at the worst start of a year since the Great Recession.

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It’s the worst first four months of the year for the stock market since the 1970s! No, in the 1930s! Can’t we just say it was a very bad start to the year? “Evil” may not do injustice. After falling 3.3% last week, the S&P 500 fell 13% in the first four months of the year, its worst start since 1939. But the Dow Jones industrial average fell 2.5%. for the week, has fallen 9.2%. in 2022, its worst start since 2020. Not to forget, the Nasdaq Composite fell 3.9% during the week, dropping it by 17% for the first four months of the year. This is the worst start to a year since 1971. For a moment, it seemed to be just the worst first four months of the S&P 500 year since 1970. No one seems to remember the ’70s to the decade that gave birth to disco, rap and punk rock, but only for inflation. It’s an easy comparison, given rising consumer prices in the US PCE core deflator, the Federal Reserve’s favorite inflation measure, rose 5.2% year-on-year in March, according to data released on Friday, while employment costs a The index rose 1.4% from the fourth quarter, the largest increase since the data set began. By the end of trading on Friday, the selloff had worsened and we were looking at the worst start of a year since the Great Recession. However, the rise in interest rates by half a point seems almost certain on Wednesday, when the Fed concludes its two-day meeting. “It underscores how late the Federal Reserve began to adjust its monetary policy to this cycle,” writes Michael Shaoul, CEO of Marketfield Asset Management. We can learn more, however, by looking not only at the first four months of the year – just a quirk of the calendar – but also at all the reductions of the four months. The Covid-19 caused the S&P 500 to fall 18% over the four months to March 2020. And fell 14% in the four months to December 2018, as the market found that interest rate hikes automatically Fed pilots pushed the economy to its limits. Looking back, there have been 25 four-month periods since 1992, when the S&P 500 fell 10% or more, and at first glance do not seem to be the worst time to invest: The index gained a median of 2.6% over the six months after these falls. This underestimates both the potential risks and the benefits. Ten of these reductions occurred between January 2000 and October 2002 – the bursting of the Internet bubble – and only four were followed by profits over the next six months. Nine more occurred at the beginning and end of the 2007-09 financial crisis, with five followed by large gains. You had to catch the end of the bear, not the beginning, to make money. Not every four-month decline occurred during a recession or even led to a prolonged decline. In 1998, the S&P 500 fell 14% due to a Russian debt default that threatened to spread to the global financial system, before a 29% rally over the next six months. The European debt crisis and the confrontation of the US debt ceiling in 2010 and 2011 also caused double-digit reductions followed by large profits. The point is not that the market will not continue to fall. Last week’s sell-off in what weren’t huge profits is definitely worrying – and we don’t need comparisons of the 1970s or 1930s to tell us that. BofA Securities strategist Savita Subramanian says a third of the recession has already been priced, with the S&P 500 falling an average of 32% over a bear market. If a recession occurs, it will be quite painful. We do not need to travel back in time to past decades as a reminder. Write to Ben Levisohn at [email protected]