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You're not imagining how placid markets have been

·Anchor
·3-min read
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This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Thursday, August 5, 2021

It's been almost a year since the S&P 500 fell 5% 

Heading into August, market observers were again reminded that this month tends to be the toughest one for the S&P 500 Index (^GSPC). 

The operative statistic that made the rounds this week reminded investors that on six occasions since 2010, the month of August has seen the S&P 500 take a loss. 

And while investors will certainly be reminded of this same data next year — seasonality data does, after all, come back every season — it is understandable if market watchers are perhaps a bit more sensitive to any inkling of bad news this year. 

After all, it's been a long time since the overall market has faced much pressure at all.

In his latest monthly chartbook circulated on Wednesday, Keith Lerner, chief market strategist at Truist Advisory Services, highlighted the following chart. It reminded investors that we're currently in the midst of the second-longest period of the last decade without a 5% drop in the S&P 500. 

It's been almost a year since the S&P 500 fell more than 5%, the second-longest streak we've seen in the last decade. (Source: Truist)
It's been almost a year since the S&P 500 fell more than 5%, the second-longest streak we've seen in the last decade. (Source: Truist)

The last time the S&P 500 dropped more than 5% peak to trough, the calendar read "2020." And only 2017's market, in which an entire year came and went without the index dropping 5%, eclipses this current run.  

"Historically, stocks tend to see two or three 5%-plus pullbacks a year, but the last one that occurred was last fall," Lerner wrote. "We see periodic setbacks as the admission price to the markets, and put a greater emphasis on the primary trend, which we view as higher over the next 12 months."

Looking at only returns for the S&P 500, of course, never tells the full story of the market. 

And this year perhaps even heightens that theme. 

The meme trade, the SPAC boom, and the rush of new IPOs hitting the market have made for plenty of single-stock volatility. 

And look no further than the action we've seen in shares of Robinhood (HOOD), which gained 24% on Tuesday and another 50% on Wednesday as the stock was halted at least three times for volatility early in yesterday's session. 

Big bets placed by investors on the re-opening trade, then on higher interest rates, and then on big cap tech stocks have led to an environment that Canaccord Genuity strategist Tony Dwyer told Yahoo Finance Live last month was one of a "rolling correction" in the market. In other words, there has been plenty of pain to go around underneath the surface for portfolio managers this year. 

Moreover, Lerner also addresses a recent Morning Brief idea of what "peak growth" may or may not mean for markets, writing that "the peak in economic momentum often injects market volatility but does not typically end a bull market."

But to steal a phrase from Fed Chair Jay Powell, before we can talk about talking about any kind of end to this or any bull market the S&P 500 first needs to drop 5%. And at least for right now, we're still waiting. 

By Myles Udland, reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

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