Last week was reportedly the worst week for the market in 10 years. I heard that repeatedly over the weekend, and had to see for myself. Since none of the talking heads gave any additional detail, I presumed that they must have been referring to the S&P 500. If that's the case, then they were incorrect, not that it really matters, and I may be picking nits.
The S&P 500 fell 7.19%, the week of 8/1/2011, slightly worse than last week's 7.05% rout. Just seven weeks later, the week of 9/19/2011, the S&P fell 6.5%. During that seven-week period, the S&P 500 was down about 16.5%. Yet, short of looking it up, I can't remember offhand what caused that drawdown (Greece?). This current period will also become a distant memory at some point.
It's painful; the fear of what may lie ahead, the confluence of events cited as the cause of the current downside volatility which include tariffs, "chaos" in Washington (the most over-used, and misunderstood term), revolving door of Secretaries of State, rising interest rates, the government "shutdown," the next recession, you name it. Could it be that the market just needed a pause, and we are all searching for the most expedient uncertainty-related reasons (many of them politically motivated) that the S&P now trades at May 2017 levels?
Meanwhile, smaller names are really bearing the brunt of the damage. The Russell 2000 is down nearly 15% year to date, and the Russell Microcap Index is down 17% during the same period. However, the quarter-to date numbers are even more eye opening, with the Russell 2000 and Russell Microcap Indexes down nearly 24% and 26% respectively. That should make the next week fun in terms of finding potential bargains for 2019.
There may indeed be further pressure in the last several trading days of the year where volume is likely to be light, some tax-loss selling will continue, and buyers will be scarce. The true test begins in the New Year, when everyone gets back to business, and volume returns.
This value investor, who by nature is skeptical, may be a bit more sanguine than others at this point. I don't buy the recession talk (not yet anyway), and believe that the Fed's current 2 rate increases in 2019 (down from the previously presumed 3) is being ignored. As for the "shutdown", it's just noise.
We should all take a break the next few days enjoy the season, and our families. All of this market "stuff" will still be here when we return.