The S&P 500 fell over two percent this week to 2488 after the worst jobs report since 2009 with millions of jobless claims. The S&P 500 also signaled bearishness with a death cross this week, which is when its 50 day moving average drops below its 200 day moving average. To put this into historical perspective, the last two major “bear market” death crosses were in 2000 and 2007 and came after 5% and 7% declines from their respective record highs. They both then went on to fall another 40% after that death cross signal. While this sounds dismal, we can look at this using a different lens. This is a historic bear market based on the ferocity of this decline. Trying to put a positive spin on this, maybe the good news is that since we\'ve already had that big decline ahead of that death cross, could the balance be flip flopped and we only have another 5% to 7% in declines ahead of us? Only time will tell. We also tried to quantify this ferocity, so we looked at the S&P 500 daily percentage changes since 19 February 2020, our most recent high. If you added up each of those daily swings in the 6½ weeks since then, the sum would be 130%. We then said, “Before that 19 February high and now looking back, how long would it have taken to accumulate that same 130% in daily moves?” It turns out it would have taken 11 months, or between 15 March 2019 and 19 February 2020. 6½ weeks versus 11 months to cover the same distance is pretty ferocious!! So the natural follow on question is, “How far did TSP TIPS travel in those same last 6½ weeks?” Well the answer is 44% versus 130%, or said another way, with about 1/3rd the volatility. That said, we’ll maintain our current allocation.
The S&P 500 fell over two percent this week to 2488 after the worst jobs report since 2009 with millions of jobless claims. The S&P 500 also signaled bearishness with a death cross this week, which is when its 50 day moving average drops below its 200 day moving average. To put this into historical perspective, the last two major “bear market” death crosses were in 2000 and 2007 and came after 5% and 7% declines from their respective record highs. They both then went on to fall another 40% after that death cross signal. While this sounds dismal, we can look at this using a different lens. This is a historic bear market based on the ferocity of this decline. Trying to put a positive spin on this, maybe the good news is that since we\'ve already had that big decline ahead of that death cross, could the balance be flip flopped and we only have another 5% to 7% in declines ahead of us? Only time will tell. We also tried to quantify this ferocity, so we looked at the S&P 500 daily percentage changes since 19 February 2020, our most recent high. If you added up each of those daily swings in the 6½ weeks since then, the sum would be 130%. We then said, “Before that 19 February high and now looking back, how long would it have taken to accumulate that same 130% in daily moves?” It turns out it would have taken 11 months, or between 15 March 2019 and 19 February 2020. 6½ weeks versus 11 months to cover the same distance is pretty ferocious!! So the natural follow on question is, “How far did TSP TIPS travel in those same last 6½ weeks?” Well the answer is 44% versus 130%, or said another way, with about 1/3rd the volatility. That said, we’ll maintain our current allocation.