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Stock Gains Can Add Up after Big Declines

Sudden market downturns can be unsettling. But historically, US equity returns following sharp declines have, on average, been positive. A broad market index tracking data since 1926 in the US shows that stocks have tended to deliver positive returns over one-year, three-year, and five-year periods following steep declines. Cumulative returns show this trend to striking effect, as seen in Exhibit 1. On average, just one year after a market decline of 10%, stocks rebounded 12.5%, and a year after 20%
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Do Downturns Lead to Down Years?

Stock market declines over a few days or months may lead investors to anticipate a down year. But the US stock market has had positive annual returns in many years despite some notable dips. Intrayear declines for the index ranged from 3% to 49%. Many years with large intrayear declines saw positive annual returns. In 17 of the last 20 years, US stocks ended up with gains for the year. Tumbles may be scary, but they shouldn’t be surprising. And
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Why Has it Been So Hard to Slow Inflation?

Following the most aggressive interest rate increases in the last 40 years, the Fed decided to leave rates unchanged in June, framing the decision as a pause. Although history shows that changes in the Fed’s policy typically take six to 18 months to work through the economy, the Fed’s rate hikes have created a dichotomy between different sectors. Spending on services, which constitute about 78% of GDP, continues to be strong and expansionary even as economic growth has slowed.* As
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The FOMO Worth Your Attention

Fear of missing out. It’s the acronym for a behavioral phenomenon where people worry they’re missing out on something important they believe may help improve their lives —information, the novel features offered by the latest smartphone or the desire to be part of an exciting shared experience like a pop star’s three-hour concert. We’ve also heard much about FOMO in the investment world over the past few years. Many will recall the so-called meme stocks or cryptocurrencies, but we can
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The Big Challenge for Commercial Real Estate

Given the uncertainties in both stock and bond markets this year and the increasing likelihood of a recession by year’s end1, it’s not surprising to see headlines focused on the real estate sector and its lagging performance. Let’s put context around these trends to evaluate the best course of action. What is driving the poor performance in real estate markets? Despite concerns, the overall real estate sector is slightly up for the year so far. That’s because the sector tracks
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