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Why the Stock Market’s Summer Slump Should Not Worry Investors

Instead of a perfect market trend, it’s more reasonable to expect a choppy market with occasional downturns but long-term upward growth. This has been the general pattern of the stock market over the past 25 years, as indicated by statistics from Howard Silverblatt, senior index analyst for S&P Dow Jones Indices. During this period, the S&P 500 has had a total return of 552.31 percent, or 7.8 percent annually, but investors had to endure numerous downturns to reap these gains.

Although August has been a negative month for the stock market so far, there haven’t been any major downturns this year. From January to July, the S&P 500 experienced five consecutive months of growth. Interestingly, the gains of the S&P 500 were largely driven by just seven big tech stocks: Apple, Nvidia, Microsoft, Amazon, Meta (Facebook), Tesla, and Alphabet (Google), which accounted for over two-thirds of the index’s overall gains.

In the same period, the S&P 500 rose by 19.5 percent, providing a total return of 20.7 percent when accounting for dividends. These were impressive numbers, but the rapid rise of the market, driven by a narrow base of stocks, raised concerns of a potential downturn.

Furthermore, from its bottom in October 11, 2022, the S&P 500 witnessed a 27.9 percent gain, resulting in a total return of 29.6 percent with dividends included, by the end of July. In June, when the market had already gained 20 percent from its October low, many commentators declared the end of the bear market, which had started on January 3, 2022, and the beginning of a new bull market.

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