I've long followed a simple/naive measure of volatility -- days during which "the market" rises or falls at least 1%. In fact, I've written many Real Money columns on this over the years, including one just last week. I've found such analysis to be worthwhile, in terms of putting market movements into historical context.
My proxy for "the market" has always been the S&P 500, which typically represents between 70% and 80% of total market capitalization. Now, by popular demand, I've applied the same methodology to one of my favorite small-cap indexes, the Russell 2000.
Not surprisingly, small-cap stocks tend to be more volatile than their larger cousins, especially in this type of market environment. In fact, during the 21 trading days so far in 2022, the Russell has traded up or down at least 1% (a "volatile" day) 15 times; five of those days have been positive. Four times the daily move has been in excess of 2%. (For perspective, the S&P 500 has endured eight volatile days year-to-date, and just one has been in excess of 2%.)
In fact, the Russell 2000 is smack dab in the middle of a run of 11 consecutive volatile days starting on Jan. 18. During that span, the index is down 5.2%. I would not be surprised to see the Russell continue its current streak. That's the environment we are in these days.
For more historical perspective, consider the extraordinarily volatile period between Feb. 21 and May 1, 2000, a 50-day stretch that started with the outset of the Covid-19 pandemic. For comparative purposes, during that period, the S&P 500 experienced 42 volatile days, 16 of which the index rose or fell at least 4%, and four instances of plus or minus at least 9%.
For its part, the Russell 2000 experienced 47 volatile days during that stretch, 19 of which had 4% moves, and five of which had 9% moves. The 14-day run from March 11 through March 30 was particularly volatile:
3/11/20: -6.4%
3/12/20: -11.2%
3/13/20: +7.8%
3/16/20: -14.3%
3/17/20: +6.7%
3/18/20: -10.4%
3/19/20: +6.8%
3/20/20: -4.2%
3/23/20: -1.1%
3/24/20: +9.4%
3/25/20: +1.3%
3/26/20: +6.3%
3/27/20: -4.1%
3/30/20: +2.3%
Talk about a rollercoaster ride; during that timeframe, the Russell 2000 was down 14.3%.
Looking back, it is hard to fathom just how volatile that period was. How quickly we forget, but sometimes it's good to have the memory of a goldfish.
Buckle up!
