Well, that escalated quickly…

Jun 08, 2019 | Spencer Glenn


Even though May 2019's volatility felt dramatic, history shows its normal and routine.

About every 4 to 5 months investors tend to forget that market corrections of 5% or greater occur about every….4 to 5 months. There was no exception as this played out again in May 2019 when we experienced the S&P 500 decline -6.9% in 4 weeks, the first monthly decline since the sharp drawdown from Q4 2018. The bigger picture tells us this was the 24th decline of >5% since 2009, which means that 5%+ corrections occur, on average, 2.4 times per year, or every 5 months. Although this information is useful, markets never follow a set schedule when it comes to volatility, but the data does demonstrate how 5%+ corrections are normal and routine.

Albeit, the speed with May’s decline was dramatic and quick (the 11th fastest monthly market decline we’ve seen from 2003 to 2019); however, to frame this latest episode in the context of other periods of market volatility there was nothing significant to note.

If we look at the intra-year market drawdowns over time, 2019 is, so far, the smallest intra-year market drawdown in the last 20 years (with the exception of 2013 and 2017). 86 of the last 92 years have seen an intra-year correction of greater than 5%. The only exceptions are 1954, 1958, 1961, 1964, 1995 and 2017.

Intra Year Drawdown for the last 90 years

May was historically normal and in line with every other period the market has declined in a similar manner. Historically, market drawdowns of this magnitude have provided opportunity for entry points into quality equity holdings for the long-term. Based on June’s reversion so far, it appears May’s volatility was no exception.


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