Here's an update on what is looking more and more like the Wild West of our markets. Small-cap stocks continue to get pummeled and nearly every day is an adventure. That's not uncommon as broad markets fall and stocks are revalued in the face of a great deal of economic uncertainty. First to go are smaller, more speculative names, and it shows.
It is no secret that the Russell 2000 is in bear market territory (down 19.83% year to date), but the daily swings have been more prevalent and more extreme. In the 92 trading days so far in 2022, the Russell 2000 has closed up or down at least 1% (the simple definition of a "volatile" day that I've been using for years) 63 times, or 68% of the time. That includes 28 "up" days and 35 "down" days.
However, in the past 17 trading days, dating back to April 26, the Index has experienced 13 volatile days (eight negative, five positive). During that rather brief span, the Russell 2000 is down 12%. What's more, nine of those volatile days have featured moves in excess of 2%, including two 3% days and two 4% days. The 4% days occurred just two trading days apart (May 5 and May 9). From May 5 to May 11, four of the five trading days were negative, and during that span, the Russell 2000 fell 13.5%. In the last two trading days (May 12 and 13), the Index is up 4.3%. Welcome to the roller coaster.
Curiosity got the best of me this weekend as I thought about what arguably was the most volatile period in market history, the fourth quarter of 2008. As a reminder, during that span the S&P 500 had 50 "volatile" days out of 64 total, and there were 16 days the index moved up or down at least 5% (for perspective, from 1950 to 2007, there were a total of 19 5% days). However, I'd never looked at that period in terms of the Russell 2000, until now.
Perhaps not surprisingly, the Russell 2000 had its own share of volatility during that period, with 59 volatile days out of 64 total. During that span, the index fell 26.5%, and there were a remarkable 20 days that the index moved up or down at least 5%, including 14 days with moves in excess of 6%. From Nov. 12 to Nov. 24, a nine-day trading span, the Russell 2000 moved more than 5% seven times. On Dec 1, it fell 11.85%.
Thankfully, so far the current period pales in comparison to the legendary fourth quarter of 2008. Our memories can be short, but it is good to look back for perspective.
