Examining Intra-Year Pullbacks: Ritholtz Chart

Barry Ritholtz is a Bloomberg View columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He blogs at the Big Picture and is the author of “Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.”
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Source: JPMorgan Guide to the Markets

For today's chart, I wanted to look at something unusual: the intra-year pullbacks of the past few decades.

As this chart (via JPMorgan Chase & Co.) shows, there is an average market drawdown of 14.7 percent. That period includes a few whopper years. Even if we were to back out the outliers -- remove the five biggest drawdowns (34 percent, 30 percent, 34 percent, 49 percent and 28 percent -- average drawdown of 35 percent within the year), we still see an 11.5 percent average intra-year drop.

Astonishingly, year-to-date the biggest drawdown we have experienced in the S&P 500 has been 7.52 percent during the initial taper concerns.

Regardless of which drawdown stat you prefer, JPMorgan's chart is a good reminder: Despite intra-year pullbacks, over the past 33 years, returns have been positive in 25 of the 33 periods in question.

What's next year likely to look like?

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To contact the author on this story:
Barry L Ritholtz at britholtz3@bloomberg.net