On August 20, the S&P 500 snapped its streak of 211 sessions without a 5% pullback. This was the longest such streak since March 31, 2003 to February 11, 2004, when the benchmark index went 219 days without a 5% drop.
But these bouts of volatility are actually quite normal. In fact, what’s unusual is how few 5% sell-offs we’ve experienced.
If this chart from JPMorgan Asset Management’s recently released fourth quarter Guide to the Markets is any indciation, it looks like stocks are gearing up for more volatility.
After establishing clear troughs in the number of yearly 5% pullbacks during the mid-1990s and mid-2000s, the S&P 500 saw a spike in the number of such moves over the latter part of those decades.
Should we be bracing for a similar situation?