SMI has frequently discussed what "normal" market volatility looks like. Typically this takes the form of quoting statistics regarding the market averaging a 10% correction roughly once per year, and so on. We feel like it's easier for investors to handle volatility when it comes if they're prepared for it in advance.
In that light, I present this doozy of a chart, showing the maximum drawdown for the S&P 500 every year back to its inception in 1914. For those not familiar with that term, maximum drawdown is simply the maximum decline the index experienced within a particular calendar year.
While this chart has been making the rounds as showing that the S&P 500 has never had a max drawdown as small as what we've seen this year, that isn't quite accurate. 1995 had a slightly smaller max drawdown, at -2.5%. This year's max has been -2.8%.
Regardless, it shows the shockingly low level of volatility the market has experienced this year. And the chart also shows that we shouldn't be surprised to see some significant price changes before long. Max drawdowns of 10% or more are the norm, not the exception.
Of course, it goes without saying that this year isn't over yet.