Is the Worst Over, or Still Yet to Come?

April 12, 2018 | Jeffrey Hoffmeyer, CFA, Lead Analyst, Asset Allocation

In the last few months investors were quickly reminded of the volatile nature of equities as these markets suffered steep declines. While there are several possible explanations — ranging from high valuations to geopolitical concerns — many are wondering if we were simply due for a correction or if this a sign of more to come. This week’s chart looks at the historical inter-year drawdowns for the S&P 500 to see how the recent pullback compares.

Since 1983, the S&P 500 index has only had five calendar years with a negative return. Despite this, 28 out of the last 35 years had an intra-year drawdown of more than 7% with the median max drawdown around 10%. Year to date, 2018’s largest drawdown was 10.2%. While this is significant, especially in comparison to the remarkably calm 2017, this is not out of the ordinary. Additionally, even with this drop in the index, the total return for the year is nearly flat thanks to dividend yields.

It is difficult to predict what happens next given the current volatility. Many geopolitical risks remain and though valuations have come down, they are still elevated in comparison to historic levels. However, this drawdown is similar in magnitude to many previous years and the historic average, suggesting that the worst may be over. Even with drawdowns of this size most years have delivered positive equity returns, meaning this could an opportunity to enter the market or invest additional funds.

Print PDF


The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Jeffrey Hoffmeyer, CFA
Lead Analyst, Asset Allocation

Get to Know Jeffrey

Related Content


What Do Higher Interest Rates Mean for Higher Yielding Equity Sectors?

It looks like interest rates will dominate both fixed income and equity markets in 2018. Potentially higher interest rates have…


Can Low Interest Rates Justify High Stock Valuations?

Given the persistence of above-average equity market valuations in recent years, a proclamation oft-heard from the financial press and market…


1Q 2018 Market Briefing

Live Webinar – Wednesday, April 18, 2018 – 1:00-2:00 PM CT


Treasuries vs. Dollar Purchasing Power

Our Chart of the Week reviews the link between the 10-year U.S. Treasury Yield and the Trade Weighted U.S. Dollar…


The Sixth Fed Hike and Rising LIBOR

The Federal Reserve announced its sixth rate hike on Wednesday, with the target fed funds rate now 1.5% – 1.75%….


What Will Drive Inflation Higher in 2018?

Driven by the rising price of oil, the unknown ultimate impact of the tax cuts, strong global economic growth and…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >