Friday, November 20, 2009

Stock Market Volatility 2008-2009

"It was the best of times, it was the worst of times..."
Charles Dickens

I wonder if Charles Dickens knew how appropriate his quote from 'Tale of Two Cities" would be in describing the stock market volatility of 2008-2009. Last year concluded with the S&P500 losing 22% in Q4. It then continued it's losing ways in Q1 of 2009 and dropped another 11%.

The S&P500 has only experienced two consecutive double digit quarterly decreases in 38 of the past 200 quarters... or just 19% of the time. So, for the lucky soles who managed to pick the end of 2008 as a good starting point, they quickly found themselves down 30+ percent in six (6) short months.

Fortunately, the tide turned in mid-2009 and the S&P500 gained 16% in Q2. It then managed to follow this up with another 16% gain in Q3.

Is this volatility unprecedented? Pretty much. It came close in 1983, but the fact remains in the past 50 years the market has not experienced four (4) consecutive quarters with double digit changes.

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