- Reuters/Stephen Lam
The markets have been all over the place in the last two months.
And let’s not forget one of the worst weeks for stocks in years when the Dow fell 500 points, and all the major indices dropped by at least 3%.
At its intra-year low, the S&P 500 was down 12%.
But, things aren’t as ugly as they could be.
In a recent presentation, JP Morgan Funds’ David Kelley shared a chart showing the intra-year max drawdowns for every year since 1980.According to his data, over the last 35 years, the average intra-year drop has been 14.2%.
So although we’re down from yearly highs, that 12% intra-year drop is still less than the average intra-year drop of 14.2%.
Notably, there were several instances where the intra-year decline was greater than that of 2015, but annual returns were still positive for the year.
For example, 1980 saw an intra-year drop of 17%, 1998 saw an intra-year drop of 19%, and 2003 saw an intra-year drop of 14% – and yet all three years saw positive returns.
“Despite average intra-year drops of 14.2%, annual returns [have been] positive in 27 of 35 years,” Kelly points out.
In sum: Sell-offs happen all the time. And sometimes they’re big and scary. But, so far, 2015 is less ugly than average.
- JP Morgan Asset Management, data from FactSet, Standard & Poors