United States

Equity markets pull back


What happened?

On Monday, Feb. 5, the S&P 500 Index and Dow Jones Industrial Average (DJIA) both fell more than 4 percent, marking the worst one-day percentage decline since August 2011. When combined with declines from Friday, Feb. 2 the last two trading sessions resulted in these indices falling more than 6 percent, bringing the indices back to levels as of mid-December 2017.

Remarkably, the recent sell-off ends a streak of more than 400 trading sessions since the last time the S&P 500 Index had experienced a 5 percent pullback (dating back to the Brexit vote of June 2016).

Asset class


January return  

February return

(through Feb. 5)

YTD-2018 return

(through Feb. 5)

U.S. Large Cap

S&P 500




U.S. Large Cap

Dow Jones Ind Avg




U.S. Small Cap

Russell 2000









Emerging Markets

MSCI Emrg Mkts





What caused the pullback?

There was not a notable development or headline that led to the recent market pullback; in fact, corporate earnings and global economic data have generally remained quite strong. Some have pointed to concerns over a pick-up in inflation, rising bond yields and waning central bank stimulus as potential factors behind the volatility. Other possible factors include stop-loss orders (which would have automatically triggered sales during the sharp intraday decline) and algorithmic trading (computer models which recognize the pace of the decline and in turn produce additional selling – a situation of ‘selling begets more selling’).

Is the recent market move unprecedented?

It is important to note that while the recent pullback has been sharp over a short period of time, the move is well within historical norms. Many headlines focused on the DJIA recording its biggest single day point decline (-1,175), though the percentage decline (-4.6 percent) was only its 100th worst single trading day, according to S&P Dow Jones Indices.

The fact that 2017 was such a unique and extended period of low volatility makes the recent market pullback feel extreme. Last year, the S&P 500 Index had a maximum peak-to-trough drawdown of only -3 percent; since 1928, the index’s average intra-year decline is nearly -14 percent. The S&P 500 Index did not decline by more than 2 percent on a single trading day last year, though it did so on 5 days in 2016, 6 days in 2015 and 4 days in 2014 (the index had 21 such days in 2011).

Frequency of Market Pullbacks (S&P 500 Index, 1928-2015)


Historical frequency

Typical occurrences per year

Typical recovery time  




1-4 weeks


Once per month


2-6 weeks


Once per quarter


2-3 months


Once per year


8 months


Once per market cycle


20 months

Source: Standard & Poor’s, FactSet, J.P. Morgan Asset Management (“Investing with Composure in Volatile Markets”)

What should investors do?

While it is understandable for investors to feel frustrated or anxious in the midst of such market volatility, we continue to emphasize the importance of maintaining a longer-term view. While the markets have recently shifted lower, nearly all investors have the same time horizon today as they did a week ago. During periods of heightened volatility, investors often feel the need to ‘do something’, though short-term, reactive moves are often ill-timed and can significantly impair the effectiveness of a well-designed investment plan. So long as circumstances and long-term objectives have not changed, investors should adhere to their long-term investment plan and should thoughtfully rebalance over time.

Wealth Management Services Disclosure

Information in this document was prepared by DiMeo Schneider & Associates, L.L.C. and although information in this document has been obtained from sources believed to be reliable, RSM US Wealth Management LLC, DiMeo Schneider & Associates, L.L.C. and their respective affiliates do not guarantee its accuracy, completeness or reliability and are not responsible or liable for any direct, indirect or consequential losses from its use. Any such information may be incomplete or condensed and is subject to change without notice. The Frontier EngineerTM is a registered trademark of DiMeo Schneider & Associates, L.L.C.

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