The Max Drawdown: Too Quiet?

by : BCM Investment Team | POSTED: Jun15, 2017 | CATEGORY: Economics f

Given the S&P 500’s relatively smooth trajectory upwards since the start the year, we thought it would be useful to do some investigating into how common this market movement is.

The chart below shows the maximum drawdown intra-year in the S&P 500® Index over the last 90 years. Year to date, the maximum drawdown has been a mere 2.8%, making it the second smallest drawdown in 90 years. However, looking at history, the average intra-year max drawdown has been over 16%. Incredibly, the S&P 500 has not had a drawdown more than that average level intra-year since 2011.

This chart to us suggests that volatility could be on the way, and it will be important to have a strategy that can react quickly when it comes.

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Performance data shown represents past performance and is no guarantee of future results.