What is going on?
Nobody likes volatility, but especially not downside volatility. Investors were lulled into a false sense of security as the S&P 500 was up every month in 2017 for the first time in history. Remarkably, we’ve gone nearly two years without a 5% drop in the market.
Examining calendar year returns for the US stock market since 1979, the average intra-year decline was about 14%, with about half of the years observed having declines of more than 10%. Roughly a third had declines of more than 15%. Despite substantial intra-year drops, calendar year returns were positive in 32 out of the 37 years examined. (Source: JP Morgan)
Bloomberg created this fascinating chart showing the least volatile ten years of the US stock market since 1945. Those years were followed by very volatile years but still ended positive the majority (6/9) of the time. 2017 was the second least volatile year over this 73-year time period.