You may have noticed larger price swings in the market over the last couple months. Another term for this is “volatility.”
Increasing volatility is normal as markets transition from up-trends (bull markets) to down-trends (bear markets). And, actually, large price swings IN BOTH DIRECTIONS are characteristic of bear markets.
Now, it’s reasonable to expect to see most of the worst daily returns in history during bear markets. However, what I found far more interesting when doing my analysis is that most of the best daily returns also occur during bear markets. In fact, eight out of the ten best days in the market (1950 – 2018) occurred during bear markets! Continue reading “Bigger Price Swings in Both Directions”
Have you ever heard of the volatility tax? In case you haven’t, it’s the drag exerted on investment returns from volatility.
In other words, even if two different investments provide the same average annual returns, the investment with more volatility will deliver lower total returns. Let me illustrate. Continue reading “Beware the Volatility Tax”
As you know, I’ve been tracking three volatility-related record streaks in real-time with you. The first two streaks (1) number of consecutive days without a daily decline ended on January 29th, and (2) number of consecutive days without back-to-back 0.25% declines ended the following day.
Streak #3 was the number of consecutive days without a 5% correction. In Volatility Update #2 (January 30th), I mentioned that this streak would end before year-end, “and, maybe, even before the first quarter is over.”
Well, today, before the end of the first quarter, this streak finally met its end at a hair over 400 days. Continue reading “Volatility Update #3”
Yesterday, I mentioned the market’s longest streak without at least a 0.6% daily decline came to an end at 99 days. I titled that post “Volatility Update #1″ because I figured more would follow. Sure enough, record streak #2 has now ended just one day after the first.
The market, until today, was on an almost 200-day streak without any back-to-back declines of at least 0.25%. With the S&P 500 losing 0.67% yesterday and 1.09% today, we can now hang that record in the market hall of fame. The most recent streak lasted over 50% longer than the previous record set in the mid-1960s. Just like yesterday’s record, I believe this one may stand for many decades as well.
This leaves one more streak I’ve been writing about in tact…for now.
- Longest streak in history without a 5% correction
When will this one come to an end? Look for Volatility Update #3 before year-end and, maybe, even before the first quarter is over.
I’m calling this “Volatility Update #1” as I’m assuming more records will end in the coming weeks and months.
I recently wrote how the S&P 500 was experiencing its longest streak in history without a 0.6% daily decline. Today, the S&P 500 lost 0.67% ending the streak at 99 days. I’m assuming it will be decades, if not longer, before that streak is broken again.
A couple of the volatility-related records still in tact:
- Longest streak without back-to-back declines of at least 0.25%.
- Longest streak without a 5% correction