As the S&P 500 fell nearly 5% last week, it was interesting to see a couple reports about the number of days that the index has declined more than 1% so far this year. I thought I was hearing things at first, because outside of myself I've rarely heard that statistic mentioned. By my count, it has happened 47 times, or just over 25% of trading days in 2022, which is considerable.
While that may be an interesting statistic in its own right, it does not tell the whole story in terms of measuring volatility. I've used the "1% move" statistic for many years, not just for the down days, but also when the S&P 500 closes higher by at least 1%. This is a rather simple measure of volatility, but my view has been that upside volatility is just as important as downside.
By my count, there have been 42 days this year that the S&P 500 has closed higher by at least 1%. All told, that's a total of 89 days of S&P 500 moves of 1% or greater, which equates to 49% of total trading days. With down days eclipsing up days and down days greater in magnitude, the S&P 500 is down 22.5% year to date, and the roller coaster ride has not been fun.
There is also a frightening chart that is making the rounds that plots the S&P 500 of 2008 with that of 2022 and shows incredible similarities. If the trend continues, this chart suggests that there is significant downside to come.
I went back and looked at 2008, arguably the most volatile period in market history. The S&P 500 closed that year down 37%; it finished up or down at least 1% on 134 days out of 253 trading days, or 53% of the time. The real volatility for 2008, however, occurred during the fourth quarter, when the index had 49 volatile days out of 64 days, a 77% hit rate.
Here's the most shocking part: The S&P 500 closed up or down at least 3% on 28 days in that quarter, and there were 16 sessions where it moved at least 5%. To put that in perspective, the S&P 500 had just 19 sessions of plus or minus 5% movement over the 57 years from 1950 to 2007. We literally experienced a lifetime of market volatility in just three months.
As painful as 2022 has been so far, we've yet to experience 2008-like volatility. Indeed, there have been zero 5% days and just nine days where it moved by 4% or greater. I don't know if the 2022 chart eventually will end up following 2008's into the toilet, but it would take some doing.