Historic Returns Following a Market Selloff
Monday’s 6.66 percent drop for the S&P 500 was the index’s biggest drop since December 1, 2008. In fact, not a single stock in the 500-stock index managed a gain by the end of the day.
The plunge was just the 16th time since 1950 that the S&P 500 has dropped more than 6 percent in a single day. But what has happened after such a big one-day drop? There might be some hope for investors after such a large selloff – at least in the immediate near-term:
- During its 15 prior occasions, the S&P has averaged a gain of 2.8 percent and has fallen just twice on the day after its big single-day drop of 6 percent or more
- The S&P is up 80 percent of the time and has averaged a gain of 5.4 percent a week after such a drop
- However, one-month after a single-day drop of at least 6 percent, gains are much more muted – the S&P has managed a gain just two-thirds of the time, posting a smaller average gain of 2.4 percent