The S&P 500 finished the day with a decline of nearly 3%, but if you ask a lot of people who pay close attention to the markets, it didn’t seem that bad.  If you’re one of those people, you can thank the phenomenon of recency bias. That’s because even though the S&P 500 had a 2.93% move today, the average daily move in the four weeks heading into today was a gain or loss of 4.65%.  In fact, over the last 20 trading days, there have only been five where the S&P 500’s average daily move was smaller.

The chart below shows the S&P 500’s average daily percentage move on a 20-day rolling basis going back to 1928.  The S&P 500’s four-week average daily move is now greater than any other time since the weeks after the 1929 crash more than 90 years ago.  Moves of this magnitude are nearly unprecedented in the history of the stock market, and the one precedent we have isn’t a very warm and fuzzy one.  While we don’t want to minimize the significance of the equity market’s decline over the last month, the circumstances surrounding the two periods in terms of the reasons for the decline and the market dynamics during each period aren’t all that similar to each other.  Start a two-week free trial to Bespoke Institutional for full access to our market analysis and much more.

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