Are today's markets really more volatile?

By Mike Jones, posted September 17, 2015

"Asian Contagion," the Persian Gulf War, 9/11, battle over the budget: these are just a few of the events over the last 25 years that each led to sharp selloffs in the US stock market.

After seeing the S&P 500 drop ten percent in a few short days recently, I decided to do a little research on short-term drops in value of the US stock market.

Although not completely scientific (just me charting on my computer all alone on a Friday afternoon!), I was able to identify 16 times over the last 25 years where the S&P 500 lost 8% or more of its value in less than two weeks time. But more importantly, I was curious to see what happened after such a steep decline.

This is what I discovered: in six of those 16 occurrences the market came roaring back within a month and it was as if nothing had happened.

In seven of the instances the market regained approximately half of what it lost in short order and was back to breakeven within six months or so.

Just three of those 16 events were part of a bonafide bear market where eventual principal erosion of 50% or more occurred. In these most severe market drawdowns the common denominator was that the US was in recession.

No one -- yes, no one -- can predict the future.

But, I can at least offer this encouragement: according to the National Bureau of Economic Statistics, the US is not in a recession now.