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A Bird's Eye View Blog

Fireside Charts: Fastest 25% Drawdown in a Century, More Fed Intervention, and Record Volatility

By:BCM Investment Team | Date:Mar16, 2020 | Category: Equity, Economics, Market Highlights, Fireside Charts

It's been what feels like a lightning-fast switch from the economy enjoying its longest and slowest period of growth to setting new types of records... Last Monday was the market's worst day since the financial crisis, Thursday anted-up with the worst day for the market since 1987, and this drawdown has set a land-speed record for the fastest 25% drawdown in the last century. The Fed's certainly taken notice, and stepped in again over the weekend with additional emergency measures, including slashing rates by a full percentage point and launching another $700 billion in QE. This didn't go far to reassure investors though, as the circuit breakers kicked in yet again this morning to halt trading. These market losses have led the S&P 500® Index's forward P/E ratio to settle in more reasonable territory at least... but will earnings be able to hold up as the world hits "pause" in the name of social distancing? With rates at (even more dramatic) historical lows and banks well-stocked on capital, we may soon see many business turning to loans to ride out the current crisis.


1. This drawdown was the fastest to lose 25% than any other bear in the last 100 years... including 1987!


25% drawdowns historical

Source: WSJ Daily Shot, from 3/16/20



2. QE is back!


federal reserve weekly assets

Source: The Chart Store, from 3/15/20



3. Similar to the last 50 bps cut, instead of calming the markets the initial reaction is spooking the market.


fed slashes rates

Source: WSJ Daily Shot, from 3/13/20



4. ...Which lead the S&P 500 to historical short-term volatility...­


s&p 500 volatility

Source: The Chart Store, from 3/15/20



5. The S&P 500 is now fairly valued looking at the forward P/E. Will the E (earnings) hold up?


s&p 500 p/e ratio

Source: WSJ Daily Shot, from 3/15/20



6. In addition to the U.S. consumer being in good shape relative to history, so too are U.S. banks:


u.s. banks capital

Source: WSJ Daily Shot, from 3/16/20



7. We are getting February data out of China...


China industrial production

Source: WSJ Daily Shot, from 3/16/20



8. Interesting data on Covid-19...


coronavirus seasonal

Source: WSJ Daily Shot, from 3/16/20




Investors hate volatility, but at BCM, we believe it can be a useful tool to help us determine when we are more likely to realize good investment outcomes and less likely to realize bad ones. For our thoughts, read "Our Take on Volatility" by Assistant Portfolio Manger, Denis Rezendes.


Our Take on Volatility: When You Are More Likely   to Realize Good Investment Outcomes






Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.