The 2011 debt-ceiling debate has been a useful, if not foreboding, analogue as Wall Street grapples with the current back-and-forth in Washington about raising the nation’s borrowing limit. Concern about a potential U.S. government default has only mounted in recent days, contributing to back-to-back weekly losses in the S & P 500. If a scenario like 2011 were to play out this year in the market, it would certainly be unsettling. But back then, a last-minute deal was eventually reached and, in many instances, the debt-ceiling weakness in stocks proved to be a great buying opportunity for investors who were willing to step in. So, with history as our guide, we wanted to take a closer look at how our current Club holdings fared in 2011. But first, a little background: The S & P 500 was off to a solid first half in 2011— up about 7% into late July — before being derailed by debt-ceiling drama. The broad U.S. stock index plummeted nearly 17% over a few-week stretch that began in late July and bottomed in mid-August. Democrats and Republicans ultimately reached a deal in early August. However, in the days after, markets were rocked when Standard & Poor’s made the unprecedented decision of downgrading the United States’ top-tier AAA credit rating. The whole saga took the S & P 500 from 1,345.02 on July 22, 2011, to a closing low of 1,123.53 on Aug. 19, 2011 — a decline of 16.5% to be exact. But a robust, 12% rally would take its place from there into year-end, bringing the index to an essentially flat performance for all of 2011. By Feb. 7, 2012, the S & P 500 closed above its late-July peak. Zoom out further: From the Aug. 19, 2011, bottom through this past Friday’s close — May 12, 2023 — the S & P 500 more than tripled in price. That’s more evidence in favor of betting on the markets over the long run no matter how bleak any one situation or pullback may seem in real-time. .SPX mountain 2011-08-19 S & P 500 from Aug. 19, 2011 to present To be sure, it’s…
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