iStock_000038830030 Bull bear

Historical Perspective on Market Volatility

Recent market volatility has grabbed headlines, and rightfully so. Since September the S&P 500 is down over 4%, the Russell 2000 representing small cap stocks is down over 10% since peaking in April 2014, and international stocks measured by the MSCI EAFA Index are down more than 11% over roughly the same time-frame. Volatility has returned to the markets with the Dow Jones Industrial Average posting triple digit moves in 3 straight sessions. As a result, many investors may be taking a closer look at their portfolios.

To put recent events in perspective, we took a look at research on market pullbacks and corrections over the long-run. According to Capital Research and Management Company, since 1900 a 5% correction in the Dow Jones Industrial Average has occurred on average 3 times a year and lasted on average 47 days in duration. Corrections of 10% or more have taken place on average once per year, lasting on average 115 days. Taking a step back and looking at the bigger picture, you can see that recent market declines are by historical norms, quite normal, and to be expected as the market inhales and exhales. In fact, you could argue the market is well outside the historical norm, not having experienced a decline of 10% or more since October of 2011. That’s among the longest periods without a 10% correction in market history, with the S&P up nearly 95% since that date.

Market Declines



With that perspective in mind, TradeKing Advisors’ managed portfolios are designed to participate in the long-term movements of markets.  While we can’t forecast the exact magnitude or duration of the current market decline, we do believe investors with a long-term mindset can use the history of market setbacks and try to set expectations and prepare mentally for times of volatility.  After all, we believe one of the keys to reaching one’s investment goals is to have a long-term plan, always remaining cognizant that one of the only constants in the financial markets is change.


Market data and image referenced from Capital Research and Management Company:
This commentary is for informational purposes only. Nothing in this commentary should be construed as an offer/recommendation to buy or sell a particular security. The data and/or information noted are from what we believe to be reliable sources TradeKing Advisors has no control over the methods or means used by these sources to collect their data and/or information; therefore, we cannot guarantee their accuracy or completeness. The opinions and estimates noted herein are accurate as of a certain date and are subject to change. The indexes referenced are unmanaged and cannot be invested in directly. The performance data shown represents past performance. Past performance does not guarantee future results.
MSCI EAFE Index: This index tracks non-U.S. stock funds (EAFE refers to Europe, Australasia, and Far East). The EAFE Index is an aggregate of 21 individual country indexes that collectively.
Russell 2000 Value Index: Market-weighted total return index that measures the performance of companies within the Russell 2000 Index having lower price-to-book ratios and lower forecasted growth values.
Standard & Poor’s 500 Index: Market capitalization-weighted index of 500 widely held stocks. Member companies are chosen based on market size, liquidity, and industry group representation. Included are the stocks of industrial, financial, utility and transportation
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