History Lesson: What Stocks Usually Do After Big One-Day Plunges

A good table from Citi’s Tobias Levkovitch on what markets typically do after big declines.

With markets off sharply, investors are scrambling to get a sense of what to do now. Figure 1 illustrates that big sell-offs do not necessarily generate that cataclysmic crescendo of capitulation that everyone seems to want. Indeed, 3% and 4% type sell-offs do not yield big short-term recoveries. Moreover, it can be argued that sentiment has not gotten dire enough if the Market Vane data is at all instructive (see Figure 2).

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Photo: Citi

And here’s the full historical table:

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Photo: Citi

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