Last Friday's 3.37% rout of the S&P 500 put the index down 14% year to date, but it was also the first move in excess of 3% that we've seen since June 24 (+3.06%). In all, there have been eight days year to date that the index has moved up or down at least 3% -- seven of them negative and one positive.
Against a backdrop of economic uncertainty, inflation, high energy prices, out-of-control government spending and a Fed that continues to tell us what many us already know -- that there are several more rate hikes are coming -- we are fortunate that there have not been more 3+ percenters. Indeed, I can't believe we have not yet had a 5% down day.
However, in the 162 trading days so far in 2022, 80 have met my simple definition of a "volatile day," when the S&P moves up or down at least 1%. Interestingly, there is an even split between the number of up days and down days at 40 each. So, while the magnitude of individual volatile days has been more benign than what might be expected, the frequency has been high, at about a 50% rate. I suspect there are more to come.
Meanwhile, small-caps and microcaps are holding up much better than I would have expected year to date, with the Russell 2000 Index down 14.69% and Russell Microcap Index down 15.15% -- not all that far removed from the S&P 500's performance. This has not yet been the "throw the baby out with the bathwater" environment one might expect, so far anyway, when smaller and lower-quality names are the first to be jettisoned as markets drop.
In addition, value continues to trounce growth, in large, small and microcap stocks.
- Russell 1000 Value Index: -7.80%
- Russell 1000 Growth Index: -21.00%
Value +1,320 basis points
- Russell 2000 Value Index: -9.39%
- Russell 2000 Growth Index: -20.10%
Value +1071 basis points
- Russell Microcap Value Index: -10.21%
- Russell Microcap Growth Index: -22.63%
Value +1,242 basis points
Two common, Captain Obvious-like terms come to mind here -- dry powder (as in keep some on hand) and buckle up (as in there's more volatility ahead). At least cash is now paying 2%+.
