It has been a painful start to the year for equity investors. The S&P 500 is down 10% YTD and the smaller Russell 2000 is down 14%. Corrections are never fun when you are in the midst of one, but it is from corrections and bear markets that profound opportunity arises. The S&P hasn’t fallen enough from its May 2015 high to enter official bear territory yet—that would take another 7% from current levels, but there are many individual stocks that have.
The chart below shows the percentage of Russell 3000 stocks (the largest 3,000 US stocks) that are down more than 20% from their 500-day high. I’m using the 500-day high as a proxy for all-time high. Over 70% of the market is now in bear territory. There haven’t been this many stocks that have corrected this much since the almost bear market in 2011. For long-term investors with both the ability and willingness to tolerate additional volatility, there are opportunities to be had.
