Market Volatility Moves in Both Directions

March 18, 2020 | Nat Kellogg, CFA, President

The last week in the markets has seen a huge increase in market volatility. This week’s chart examines the largest daily moves (the ten worst and ten best) in the S&P 500 index since 1950, in an effort to provide some historical context to the recent volatility. As the chart shows, the recent market moves are not unprecedented, but they are historic. Over a course of just six trading days, the S&P 500 had three of its worst — and one of its best — days in the last 70 years. Beyond just the magnitude of the market moves, this week’s chart attempts to highlight a few important reminders for investors.

First, market volatility tends to move in both directions. We have color-coded the market moves by event, and it is worth noting that in the wake of the 1987 stock market crash, the Global Financial Crisis, and the recent volatility around the coronavirus, U.S. equity markets have seen some of the worst — and best — days ever. While all this volatility clearly creates opportunities for rebalancing, the market volatility can create a significant amount of short-term timing risk. This is one reason why clients should consider gradual rebalancing over a period of days or weeks to limit the risk of short-term market volatility.

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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.