In falling markets, stock prices not only go down in price — they also go back in time, dropping to values first reached on the way up.
The stock market setback of 2016 has traveled farther back in time than most declines of similar magnitude. With the S&P 500's trip to and below 1,900 for much of January, it was knocking around levels first reached in early 2014. At the worst of the sell-off on Jan. 20 – when the index sank to 1,812, 15 percent below its 2015 high — the S&P reached a level first touched in December 2013.
This retreat has generated plenty of largely semantic front-porch arguments about whether it's still a bull market if no net progress has been made in nearly two years. But fewer are asking the more practical question: How would an investor have done over time by buying the market when it sat at the same level of nearly two years earlier?
Michael Batnick, director of research at Ritholtz Wealth Management, obliged my request to run the numbers on all prior instances when the S&P 500 was within 2 percent of its level from 21 months earlier, which is where it is now. There were only 44 prior instances since 1928 when this was the case, out of more than 1,000 rolling 21-month periods.