The Lack Of A Pullback Is A Global Thing

Pullbacks so far in 2017 have been historically small for equities here in the U.S., with the S&P 500 Index’s last 5% correction occurring more than a year ago and the last 3% dip as far back as nine months ago. Incredibly, the largest pullback so far in 2017 for the S&P 500 is only 2.8%, marking the smallest intra-year pullback since 1995 and the second smallest going back to the Great Depression. Now here’s the catch: This lack of a substantial pullback is not limited to the U.S.

Per Ryan Detrick, Senior Market Strategist, “There must be something in the water around the globe, because the S&P 500 isn’t the only major index that hasn’t pulled back much in 2017, and we’ve never seen anything like this before. 1995 is widely considered one of the least volatile years ever, with the max intra-year pullback for the S&P 500 standing at a record low of 2.5%. But did you know that the MSCI Emerging Markets (EM) Index pulled back 18.4% that year while the Japanese Nikkei lost 26.4% from peak to trough? Well, this year EM has pulled back only 3.0% and the Nikkei 6.5%, making 2017 stand alone as the year that global volatility stopped.”

Since 1990, if you add up the max intra-year pullback on the S&P 500, EM, Nikkei, and the MSCI EAFE Index (Europe/Asia/Far East), the total combined pullback from the four major indexes so far this year is only 14.6%, well below the previous record of 32.3% from 2005.

What does it mean? History would suggest that what we’ve seen so far this year is extremely rare, and to see it continue through the end of the year would be even rarer. Some type of increased volatility around the globe would be perfectly normal. When it comes, it will be important to remember that volatility is just that: normal.  We appreciate that it can be easy to get lulled into a sense of comfort after such a long stretch of market serenity, but that isn’t how markets usually work.



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The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted, market-capitalization index that is designed to measure the equity market performance of developed markets, excluding the United States and Canada.

The Nikkei Index is short for Japan’s Nikkei 225 Stock Average, the leading and most-respected index of Japanese stocks. It is a price-weighted index comprised of Japan’s top 225 blue-chip companies on the Tokyo Stock Exchange. The Nikkei is equivalent to the Dow Jones Industrial Average Index in the United States. In fact, it was called the Nikkei Dow Jones Stock Average from 1975 to 1985.

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