Volatility rising back to normal

Chart of the week

The S&P 500 tanked twice this year by some 10%. Neither nice nor historically unusual.

So far, 2018 has proved to be disappointing for equity investments in many respects. There are still a few weeks left, but at the moment the S&P 500 is trading around 3.7% below the forecast we published for the end of 2018 about one year ago. Other markets have done even worse.

After unusually quiet markets in 2017, we expected volatility to rise again. This seems like an easy call in retrospect, but one shouldn't forget that the same, "obvious" call would have proved wrong in the past couple of years. In our "Chart of the Week", we compare the number of S&P 500 declines of at least 3% with the average magnitude of the decline in each calendar year. This shows that 2018 almost exactly matches history: in 2018 six times, we saw a decline by more than 3% (average fall: 7%). Since 1990, declines of more than 3% occurred almost seven times a year (average fall: 5.9%). So from an average-volatility perspective, 2018 has been just a normal stock-market year. Looking at the top left corner, 2017 was the big exception, when the S&P 500 did not drop by 3% or more even once. Dropping twice by some 10%, as the index has this year, might seem more exceptional. But when looking back in history, it is not that uncommon: seven times since 1990, there have been at least two declines by 10% or more within one year.

Sources: Bloomberg Finance L.P., DWS Investment GmbH as of 11/22/18

CIO View

This website uses cookies in order to improve user experience. If you close this box or continue browsing, we will assume that you are happy with this. For more information about the cookies we use or to find out how you can disable cookies, see our Cookies Notice.

You are now seeing the South Africa version of the page despite being located in United States. You can change the country below.

You are about to change the country to United Kingdom despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to South Africa despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Austria despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Switzerland despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Germany despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Singapore despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to France (en) despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Italy (en) despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Belgium despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Spain (en) despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Japan despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Sweden (en) despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Portugal despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Netherlands (en) despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Korea despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Luxembourg despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Hong Kong despite being located in United States. If you still want to change your region, please click here.

You are about to change the country to Taiwan despite being located in United States. If you still want to change your region, please click here.

Other country

Other country