Chart of the Week: Best and Worst Market Days Stick Together

Jeffrey DeMaso

Portfolio Manager

September lived up to its reputation as a lousy month for stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. as the S&P 500 index posted its third-worst September in six-and-a-half decades. Then, as mentioned above, October got off to a cracking start with the S&P index gaining more than 2% on each of the first two days.

What this volatilityA measure of how large the changes in an asset’s price are. The more volatile an asset, the more likely that its price will experience sharp rises and steep drops over time. The more volatile an asset is, the riskier it is to invest in. tells me is that we are firmly in a bear marketA period in which stock prices decline significantly from recent highs and remain below previous high marks for weeks or months. Generally, a decline of at least 20% in stock prices is considered the threshold marking the start of a bear market.. During bear marketsA period in which stock prices decline significantly from recent highs and remain below previous high marks for weeks or months. Generally, a decline of at least 20% in stock prices is considered the threshold marking the start of a bear market., stocks tend to move much more—both up and down—on any given day than in bull marketsA period during which stock prices rise significantly from recent lows for weeks, months or years.. In fact, the worst and best days in the stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. market tend to cluster during bear markets.

As you can see, the 20 best days (triangles) and the 20 worst days (diamonds) in the stock market since 1990 occurred during the run-up and then bursting of the tech bubble (1997–2002), the Global Financial Crisis (2008–2009) and the COVID panic (March 2020). Yes, there were also a few outliers, but you get the picture.

I think there’s some logic to all of this: When stocks are down a lot, trader and investor emotions are on edge. When emotions are running high, the market is poised for big swings day-to-day.

The fact that the best and worst days are clustered together is why you can’t let the bad days spook you out of the market… it would cause you to miss the best days. And you very much want to be there for those good days.