I can see the lead on CNBC tomorrow morning already
Market Plummets 3%; Worst daily move since…(Cues dramatic music)
a week ago Monday. (Yanks needle off record)
What?!
Yes, for all the breathless talk on CNBC and Fox Business today, the last time we saw the market drop this much in one day was August 5th. Less than 2 weeks ago. You remember don’t you? Yeah, neither do I.
I was prepared to spend some time this afternoon going back through the year to find the last 3% drop in the market. 29 seconds later, voila.
In fact, August 5th was basically a twin of today. The market (S&P 500) fell practically the same amount and finished at essentially the same level, 2,844 v. 2,840, where it stands today
Is This Volatility Normal?
The reason most of us probably don’t remember August 5th is that the market has moved at least 1% up or down on 7 of the past 11 trading days. That seems like a lot of activity over the past couple weeks, and there’s been plenty of news, economic and otherwise, to cause these whipsaws.
Since it took less than a minute to find the last big down day, I went ahead and reviewed the rest of the year for big moves, both up and down.
By my count, so far this year the market has moved:
- +/- 1% a total of 19 times
- +/- 2% a total of 5 times
- +/- 3% a total of 1 time
(The moves today and August 5th were technically just a smidge below 3%)
So, is this an abnormal amount of movement? After days like today, it certainly feels like it. But, since I couldn’t even recall an equivalent day less than 2 weeks ago, I decided to look at some actual data.
Historically a Pretty Quiet Year
I wasn’t about to go through decades of numbers, otherwise, you’d be seeing this post probably never. Luckily, other people with more time on their hands (or interns) have wondered the same thing.
The verdict?
Since 1928, the market on average has 60 days each year with 1% moves, 17 days with 2% moves, and 6 days with 3%+ moves. (Source: Dorsey Wright & Associates)
Given that we are almost 2/3 of the way through the year, 2019 so far has been below average. Of course, if the rest of the month turns out to be like the the first 2 weeks, we could get to ‘normal’ very quickly.
For those of you who would like to see the yearly details, I’ve put a table at the bottom of the post.
Minor Turbulence or a Double Bird Strike?
My 15 year old daughter watched the movie “Sully” over the weekend. She was so impressed that, although both engines failed, Captain Sullenberger was able to calmly go through his checklists and determine the safest option. He then was further able to execute it by smoothly ditching the plane on the Hudson river.
Markets go through bouts of turbulence every year. Most of the time they are minor and, while uncomfortable for a moment, usually don’t require significant action.
Vigilance is needed however, because every now and then what may be initially thought of as normal actually becomes something more serious. Having a proven risk management process, along with the discipline to consistently execute it, helps successfully navigate the crisis.
It also helps if Tom Hanks plays you in the movie.
