Daily Archives: Mar 24, 2020 at 08:17 am EDT

Managing Expectations By Simulating S&P 500 Drawdowns

The US stock market tumbled again yesterday, falling to a 3-1/2-year low, thanks to expanding coronavirus threat. The economic outlook is grim, at least for the near term, and so the market is attempting to price in this stark change. The result, not surprisingly, is a sobering, rapid fall from grace for stocks, which a bit more than a month ago reached a record high, based on the S&P 500. For the novice investor, the sharp slide in the market may appear to be off the charts. In fact, we’ve been here before, based on drawdown data. Perhaps new records for bear markets will be set in the weeks and months ahead, but for the moment it’s useful to consider how the current drawdown stacks up vs. history. In addition, running simulations on drawdowns adds another dimension of risk analytics to consider what’s possible.

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Macro Briefing | 24 March 2020

As Congress haggles over stimulus bill, economic outlook darkens: Politico
Will Trump reopen the economy, against the advice of medical experts? BBC
Fed rolls out major expansion of lending operations for corporates, munis: WSJ
Should Fed emergency lending go beyond banks? Bloomberg
Eurozone economic activity collapses in March, via PMI survey data: IHS Markit
Coronavirus woes offer business upside to technology companies: NY Times
Chicago Fed National Activity rebounded in Feb, but March data will be ugly: CF
Vanguard expects a “sharp but short contraction” for US economy: Vanguard