Black Monday Is Not a Black Swan
Last Monday, the S&P 500 dropped by more than 3.5%. This is a big drop, and has a lot of folks wondering if they should be invested in the market at all. It’s easy to get wrapped up in media coverage, and not keep last Monday in perspective. It was a bad day, but historically, we see something like last Monday a little less than twice a year. Putting “Black Monday” In Perspective We went back and looked at the daily returns of the S&P 500 Index from January 1, 1926 to June 30, 2015 – almost 90 years of market returns. During that time period, there were 164 days with returns worse than the -3.66% drop we saw last Monday. So, on average, we saw a day at least as bad as “Black Monday” almost twice a year. I wouldn’t call that common, but I wouldn’t necessarily call it uncommon either. About 1.28% of all of trading days in our analysis actually had returns below -5%. While a “Black Monday” equivalent happens about twice a year, something worse happens a little less than once a year.We can slice and dice the daily numbers a thousand different ways, but the […]
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