- Top Gear/Youtube
Stocks are up. In fact, three days into the post-Brexit world, the Dow Jones is up nearly 200 points, and stocks around the world jumped on Tuesday.
This is encouraging news given the giant sell-off that occurred over the past two trading days with declines of over 600 points and 250 points, respectively, in the Dow.
“Historical aftermaths, we generalize, are mixed to Bullish for the near-term but with the only sure bet continued volatility,” said a note from Tom Leveroni at Nautilus.
“For some perspective, the two most comparable periods to the >9% loss for global stocks (MSCI World ex-US, MXWOU) are the 1987 crash and the October 2008 financial crisis. Take note that the SPX rallied the day following those two declines by an average of 10% [small sample warning],” the note said.
Yes, these are just two instances, and as we’ve said before, history may not be the best guide for future results, but in many cases it’s the best we’ve got. Given that, the current trend indicates that stocks outside the US could see some serious gains. For the US, the traditional move is similarly upward-looking.
“Recent times the SPX fell > 5% in 2 days were also biased positively in the near-term if one could stomach the gut-wrenching volatility,” the note said.
In fact, according to Leveroni, the S&P 500 has dropped more than 5% over a two-day period 29 times since 1996. Nineteen of those times stocks ended the following day higher, and 21 of those times stocks ended the month higher.
So, yes, it may look bad now, but history suggests that it could get a lot better soon – as long as you hold on tight.
- Nautilus Investment Research