Is the Brexit Opening the Door to More S&P 500 Weakness?

Friday’s market declines due to the Brexit triggered several notable points. The S&P 500 had its first 3% drop in 210 days, with the largest one-day drop since August 24, 2015. Since the S&P 500 moved to 500 stocks in 1957, only once in history was there a larger one-day drop closer to a new high than Friday and that was on November 15, 1991. Also, the S&P 500 had gone 54 straight days without a 1% dip before Friday’s big drop.

With the big drop on Friday, many are wondering if this shot of volatility after a long lull could be the start to more weakness. Today we will take a closer look at what happens after more than 200 trading days without a 3% drop, and then what happens after that first 3% drop.

Looking at the data, since 1987, there have been 11 other times the S&P 500 went at least 200 days without a 3% drop. The average return two weeks later is -1.3%, and the average return a month later is -0.5%. The good news is, going out a full three months, returns jump up to 2.8% on average, with a median return of 6.1%. It has taken a median of 32 trading days for the S&P 500 to get back to pre-drop levels.


More near-term weakness is possible after such a long stretch without a 3% drop. The good news is that this pattern has rarely been the start of a major new bear market; rather, it could potentially signal an opportunity to add on some weakness.

Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

Stock investing involves risk including loss of principal.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This research material has been prepared by LPL Financial LLC.

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