The other day, I was thinking, it's been a while since the S&P 500 has had a -10% decline. These type of declines are normal in bull markets. Ryan Detrick did some research a few years ago on how often the S&P 500 corrects -10% in any given year. At that time, his work said that the S&P 500 corrected -10% about 53.5% of years between 1960 - 2015. What that simply means is the odds are better than half that the S&P 500 sees at least a -10% draw down in any given year. So -10% declines are quite normal and should be expected.
So when is the last time the S&P 500 has had a -10% decline? Lets take a look at the chart below:
436 trading sessions since the last time the S&P 500 has had a -10% decline. That streak goes all the way back to January 2016! We're coming up to the 2 year mark since the last -10% draw down. This is pretty abnormal and makes me think that type of decline could be imminent. In fact, we're 9 months into the year, and we haven't seen a -5% move in the S&P 500 this year!
So what does this all mean? It just simply means that the S&P 500 hasn't had a -10% draw down in a long time. Does it mean that we're going to crash -10% tomorrow? No, but I'm positioned for a decline of that magnitude.
Thank you for reading!
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