March 31, 2020

The Coronavirus Market Correction – Two Ways to Place Volatility in Context – An Update

Since our March 9th note placing current market volatility in context, the market, as measured by the S&P 500, has continued to see major swings in both directions.  S&P 500 daily losses of 4.9%, 9.5%, 12%, 5.2% and 4.3% have occurred as well as daily gains of 4.9%, 9.3%, 6%, 9.4% and 6.3%.  Despite the wild swings, however, the cumulative return from March 10th through March 30th, is down only about 4%.

It is important to remember that placing the current market correction in context can help alleviate the stress all of us face during this time.  Below are two charts that can help us take a broader view and make it easier to stick with our investment plans.


Chart 1 – $100,000 Investment – January 30th, 2019 – March 30th, 2020Source: Kwanti

In the period of just over a year before the Coronavirus market correction began on February 20th, (January 1st, 2019 through February 19th, 2020) the market was up over 38%. One way to put the current market volatility in context is to go back to the last time the S&P 500 was around this level.  It turns out we only have to go back to the end of January 2019 to see the market at the same level as we see today.  A $100,000 investment in the S&P 500 total return index would be roughly flat assuming we invested at the end of January 2019 and held through March 30th, 2020.


Chart 2: Comparing Market Crises

Source: Kwanti

Another way to put things in context is to compare the Coronavirus market decline to other recent market declines including the early 2000s technology bubble, the 2008 financial crisis and the very recent Q4 2018 selloff precipitated by concerns about slowing economic growth and trade tensions with China.  While the first two periods were considerably longer than we have experienced so far with Coronavirus, the data help give us a sense of the relative magnitude of other market corrections compared to Coronavirus.

While the market volatility is likely to continue for some time, remember to take a step back from the headlines and focus on the key investment principles that worked during prior market declines.

  • Stick to your investment plan
  • Rebalance to your target allocations
  • Stay diversified
  • Control what you can control and let the rest go
  • Most importantly – stay safe