Quick Thoughts on the Past Week: US Equities

Over the last few days we have all observed the apparent comeback of volatility, which has been mostly absent over the past year. While the market sell-off has understandably unsettled many investors, we are encouraging our clients  not to be spooked by what we view as “normal” market behavior, bearing in mind that we have enjoyed surging markets with essentially rock-bottom volatility over the past year.

The below chart reflects the historical calendar-year maximum drawdowns for the S&P 500 - that is, the most severe loss from "peak" to "trough" before a new peak is achieved. The chart makes clear that these pullbacks occur frequently and can be severe, even in the context of a calendar-year return that is ultimately positive.

We also believe the placid 2017 environment was a function of extremely low levels of volatility (-3% max drawdown) relative to long-term historical experience. A resurgence of volatility was to be expected and is not always unhealthy for markets, particularly in the context of strong economic fundamentals.

For a more in-depth discussion of the current environment, we encourage you to request our latest audio commentary and presentation discussing current economic and market conditions.

Besides attributed information, this material is proprietary and may not be reproduced, transferred or distributed in any form without prior written permission from WST. WST reserves the right at any time and without notice to change, amend, or cease publication of the information. This material has been prepared solely for informative purposes. The information contained herein may include information that has been obtained from third party sources and has not been independently verified. It is made available on an “as is” basis without warranty. This document is intended for clients for informational purposes only and should not be otherwise disseminated to other third parties. Past performance or results should not be taken as an indication or guarantee of future performance or results, and no representation or warranty, express or implied is made regarding future performance or results. This document does not constitute an offer to sell, or a solicitation of an offer to purchase, any security, future or other financial instrument or product.