Drawdowns in History

S&P 500 drawdowns from 1950 to 2019-04
Red = On the way down, Yellow = Recovering from trough, Cyan = No -10% drawdown

 

 

We focus on the drawdowns exceeding -10% - giving us a sample size of 23.

A simple average would indicate that such drawdowns occur on average every 3.04 years.

The average time between such occurrences (from the end of one to the start of another) is 452 days.

Start End Duration (Days) Nadir (Lowest Point) Date of Nadir
13/6/1950 22/9/1950 101 -14.02% 17/7/1950
6/1/1953 11/3/1954 429 -14.82% 14/9/1953
26/9/1955 14/11/1955 49 -10.59% 11/10/1955
6/8/1956 24/9/1958 779 -21.47% 22/10/1957
4/8/1959 27/1/1961 542 -14.02% 25/10/1960
13/12/1961 3/9/1963 629 -27.97% 26/6/1962
10/2/1966 4/5/1967 448 -22.18% 7/10/1966
26/9/1967 29/4/1968 216 -10.11% 5/3/1968
2/12/1968 6/3/1972 1190 -36.06% 26/5/1970
12/1/1973 17/7/1980 2743 -48.20% 3/10/1974
1/12/1980 3/11/1982 702 -27.11% 12/8/1982
11/10/1983 21/1/1985 468 -14.38% 24/7/1984
26/8/1987 26/7/1989 700 -33.51% 4/12/1987
10/10/1989 29/5/1990 231 -10.23% 30/1/1990
17/7/1990 13/2/1991 211 -19.92% 11/10/1990
8/10/1997 5/12/1997 58 -10.80% 27/10/1997
20/7/1998 23/11/1998 126 -19.34% 31/8/1998
19/7/1999 16/11/1999 120 -12.08% 15/10/1999
27/3/2000 30/5/2007 2620 -49.15% 9/10/2002
10/10/2007 28/3/2013 1996 -56.78% 9/3/2009
22/5/2015 11/7/2016 416 -14.16% 11/2/2016
29/1/2018 24/8/2018 207 -10.16% 8/2/2018
21/9/2018 23/4/2019 214 -19.78% 24/12/2018

 

The distribution of the lowest points of each instance has a median of about -0.2.

There is (unsurprisingly) a strong relationship between drawdowns and the duration of the drawdown - deeper drawdowns take longer to recover. Across the board, the duration of the drawdown for most cases exhibit a linearly proportionate relationship to the maximum extent of the drawdown. This is however more of a point of interest and is not so useful, as we don't know in advance how deep any ongoing drawdown is going to be - we first have to make an assumption on where the lowest point is before we can predict how long it will be until it fully recovers.

Speed of recovery

For each instance, we can look at the speed of recovery, defined as a ratio of (Down/Up) days, to and from the nadir. A ratio of <1 means that it took longer to climb back up than it took to fall down.

There seems to be no relationship between the extent of the drawdown and the recovery speed ratio, and the ratio can vary a lot.

Sstart End Down Up Speed
13/6/1950 22/9/1950 34 67 0.51
6/1/1953 11/3/1954 251 178 1.41
26/9/1955 14/11/1955 15 34 0.44
6/8/1956 24/9/1958 442 337 1.31
4/8/1959 27/1/1961 448 94 4.77
13/12/1961 3/9/1963 195 434 0.45
10/2/1966 4/5/1967 239 209 1.14
26/9/1967 29/4/1968 161 55 2.93
2/12/1968 6/3/1972 540 650 0.83
12/1/1973 17/7/1980 629 2114 0.30
1/12/1980 3/11/1982 619 83 7.46
11/10/1983 21/1/1985 287 181 1.59
26/8/1987 26/7/1989 100 600 0.17
10/10/1989 29/5/1990 112 119 0.94
17/7/1990 13/2/1991 86 125 0.69
8/10/1997 5/12/1997 19 39 0.49
20/7/1998 23/11/1998 42 84 0.50
19/7/1999 16/11/1999 88 32 2.75
27/3/2000 30/5/2007 926 1694 0.55
10/10/2007 28/3/2013 516 1480 0.35
22/5/2015 11/7/2016 265 151 1.75
29/1/2018 24/8/2018 10 197 0.05
21/9/2018 23/4/2019 94 120 0.78