So, a buddy comes in. She’s been grinding her teeth over recent, seemingly extreme, market volatility – large moves to the upside and large moves to the downside. She’s wondering if this is something new, unusual or predictive such that we should be taking some trading action.
History reveals that large daily upside or downside moves occur with some regularity. A graph below reveals the “Distribution of US Large Cap Market’s Daily Returns from January 1990 – December 2018”. An examination of this information reveals:
Exhibit 1: Distribution of US Large Cap Market’s Daily Returns from January 1990 – December 2018
Gray lines show two standard deviations from mean (-2.17%, 2.26%), which is a statistical measurement of historical volatility that represents 95% of all outcomes. A volatile stock tends to have a higher standard deviation from the mean.
In US dollars. US Large Cap is the S&P 500 Index. S&P data 2019 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. The information shown here is derived from the index. Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Values change frequently and past performance may not be repeated. There is always the risk that an investor may lose money.
A 3%* market move up or down occurred on about 1% of trading days in the 29 years studied.
Given approximately 250 trading days annually – investors could expect 2-3 daily moves up and 2-3 daily moves down in the 3% range annually.
Some years there could be more and some years there could be fewer ‘big move days’.
More extreme percentage upside or downside moves do occur, but, even less frequently**.
Toward answering the question of “is this volatility unusual such that we should be taking some trading action”– we have found no statistically-significant evidence that short-term volatility – be that volatility modest or extreme – is predictive of future market direction. Advice to the contrary
is speculative.
Knowing that “volatility happens in the market”, we recommend for our clients All-Weather Wealth Management Plans designed to achieve our client’s long-term needs for currency while being able to withstand market moves to the downside or upside – be those downside moves short-term or protracted. Trusting this will find you well and not grinding your teeth over market volatility that is neither predictive nor unprecedented, we remain
Yours truly,
Warburton Capital Management
*As of August 14th, 2019, a 3% market move represents about 750 Dow Jones 30 Industrials points or 85 S&P 500 points.
**“Market movement” is referencing daily movement of the S&P 500 Index. All data is sourced from index history.
Jonathan Hall is the CEO and President of Warburton Capital Management and a member of the Board of Directors. Jonathan has been a member of the Warburton Capital team and a principal of the firm since 2013.
As President of Warburton Capital, he manages day-to-day operations, leads the firm’s advisory and operations teams, and directs efforts to attract and retain talent. As a member of the firm’s Board of Directors, he works with the firm’s Founding Principal and the Board of Directors to derive and implement strategic decisions regarding the direction of the firm such as mergers and acquisitions, new lines of business, and business development.
Jonathan is a CERTIFIED FINANCIAL PLANNER™ Practitioner; he guides his clients through a life of financial purpose, helping them to define and achieve their goals as a fee-only fiduciary financial advisor.
Jonathan earned a B.A. in History, a B.A. in Government, and an M.B.A. from Oral Roberts University, where he served as President of the ORU Graduate Business Association. He further earned a Master of Science in Financial Services (M.S.F.S.) with an emphasis in Financial Planning from Saint Joseph’s University.
Jonathan has served as an Adjunct Professor of Finance at ORU teaching Personal Financial Planning and Capital Markets. Jonathan was recognized in 2016 as one of Tulsa’s “40 Under 40.” Jonathan is a graduate of Leadership Tulsa, Class 51. From 2020-2021, he served as the President of the Board of Directors for Emergency Infant Services and had served on that Board since 2014. He served from 2023-2024 as a Trustee at the Tulsa School of Arts and Sciences (TSAS).
In 2019, City Councilor Phil Lakin appointed him to the City of Tulsa Sales Tax Overview Committee, representing District 8. In 2020, he was appointed by Governor J. Kevin Stitt to the Oklahoma Commission on Children and Youth, serving as a member representing Business & Industry. In 2022, Governor Stitt re-appointed him to that Commission, and he was elected Secretary by his peers.
Jonathan and his wife of 12 years have three children and a beloved family Golden Retriever.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
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