The S&P 500 is down five straight days for the first time since the February lows. The last time it was down six straight days was August 2015, and it last hit seven straight red days in November 2011. Growing concerns over Great Britain leaving the European Union (also known as Brexit) has led to much of this recent weakness. With that vote still a full week away, the odds of continued volatility are high. In case you were wondering, the longest losing streak ever was 12 straight days in the red in 1966.
This is the second five-day losing streak of the year; for comparison, there were six five-day losing streaks last year. The most five-day losing streaks in recent years was in 2011, at eight.
Going back to 1950, this was the 407th five-day losing streak. Below are all the returns after five-day losing streaks since 2012. All in all, the returns have been rather strong. In fact, the last two five-day losing streaks bounced back with gains of 4.8% and 5.6%, respectively, five days later.
The worst five-day losing streak ever took place in October 2008 when the S&P 500 dropped 18.3%. The smallest decline for a five-day losing streak was a drop of only 0.65% in 1964. The current five-day drop of 2.2% is in the bottom 25% of these streaks, in terms of the extent of the decline. Interestingly, the returns after these minor five-day dips are rather weak: down 0.1% one week later and down 0.2% both two weeks and one month later. Compare that with the top 25% (thus, the worst declines) of all the five-day losing streaks, which are up 1% a week later, 1.2% two weeks later, and 1.4% a month later. In other words, small losses during a five-day losing streak might not be such a good thing.
Uncertainty and worry are running high after the recent losing streak. History would say that we would prefer to see a big drop during a five-day losing streak for stronger future gains; unfortunately, that isn’t what we have seen the past five days. We came into June expecting the possibility of a pullback (see the Weekly Market Commentary, “Jam-Packed June”), and this could be it.
IMPORTANT DISCLOSURES
Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
The economic forecasts set forth in the presentation may not develop as predicted.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
Stock investing involves risk including loss of principal.
The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
This research material has been prepared by LPL Financial LLC.
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