SEI Investment Management
Global financial markets experienced significant volatility earlier this month, with average daily movements of 4.25% in the S&P 500 from August 4 to August 11. Looking at the historic day-to-day changes in the S&P 500 since 1950, we find that the average change is 0.03%, and the
average magnitude of these changes is 0.65%. In other words, the average daily movement, whether up or down, has been slightly more than half of a percent. If we applied normal statistical assumptions to the data, a change of 3% or more would be quite surprising.
Despite the recent volatility, our view of the markets remains intact. Strategically, the U.S. economy appears to have entered a soft patch from which it is likely to emerge without entering recession. Equity valuations appear attractive to us, and we believe Treasury prices are rich. Unfortunately, markets continue to react in an irrational fashion, and we expect them to continue to do so until the European debt situation is resolved, the U.S. debt ceiling is permanently addressed and the 2012 elections have come and gone.
Read the full report from SEI – Market Volatility