history stock market drawdown and recovery analysis

History stock market drawdown and recovery analysis update#
History stock market drawdown and recovery analysis free#

Source: Bloomberg and Saxo Groupīut the last couple of years bull market, improving labour market dynamics, a larger focus than ever by media on technology stocks, the rise of crypto and Tesla, have pulled many young people and women into the game of equity investing. There are also many mentioning of young people and women nor participating. Even has late into the current bull market as 20 you can find many articles on where the retail investor is in equity markets, and whether they will ever come back. The drawdown after the financial crisis in 2008 and the subsequent unemployment rate was also detriment for retail investor participation. Investors are impatient people despite many argue they invest for the long term. This was one of the main reasons retail investors left the equity market after the dot-com bubble burst. What is important to investor psychology is the drawdown length. The median and mean drawdown length of these 15 drawdowns are 121 and 157 trading days respectively, so the current drawdown could extend for 6-9 months if this is an average drawdown. The current drawdown is the 15 th largest since 1 January 2003, so while it has felt dramatic to many investors it is still a benign correction. And so, the question rolls on: Is the market's rally the foundation for new highs in the near future? Or, as suggested by history, we're in a bear market rally? Stay tuned.Every drawdown has its unique cause and comparisons should be made with great caution, but when you face a drawdown of meaningful size you need to get your statistical prior right. But with a global recession raging, and prospects for a vaccine still uncertain, the market's headwinds remain potent. The future's uncertain, but if the strong rebound of late is an indication, we may be looking at one of the faster recoveries on record. The monster, of course, is the 1929-1932 drawdown of -84% - a hole that wasn't filled until 1954!Īs for the current correction, it continues to be a more or less middling affair through May 11. In other words, drawdowns are uglier in the pre-1950 data - one in particular. Note that this year's drawdown looks milder vs. Note too that the current monthly data for May 2020 runs through May 11.Īccording to Shiller's data, the maximum drawdown in this year's correction (just shy of -20%) ranks as the 14 th deepest peak-to-trough decline since 1871 for US stocks.

History stock market drawdown and recovery analysis update#

This update has a much longer history, but with less granularity. daily data, which reviewed recently for the S&P 500, using a 1950 start date via Yahoo Finance numbers. The first thing to note is that calculating drawdown through a monthly lens offers a somewhat different view vs. For convenience, we'll refer to the entire history as the S&P 500.

In addition, the official S&P 500 Index was launched in 1957 and so the earlier numbers are results compiled from several sources. With that in mind, let's review how the current drawdown for the S&P 500 compares over the past century and a half.įirst, a few housekeeping notes.

History stock market drawdown and recovery analysis free#

Longer is better for analyzing the stock market, which is why Professor Robert Shiller's data set (with an 1871 starting date) is one of the great free resources on the internet for studying the history of US equities.