Sector Drawdowns

Michael Santoli pointed out recently that if the current lack of volatility holds through December, the market will print a new record for the number of days without a 5% move.

While it is true that on the surface the volatility of the market has been very calm, under the surface there have been several strong currents. We were curious about these undercurrents so we pulled the sector data over the last 400 day trading period to find the volatility within the sectors. The results show that over the past 400 trading days, there have been eleven 5%+ drawdowns over the ten sector ETFs. While some of the sectors have copied the S&P 500 and lacked a 5% drawdown (Materials, Consumer Cyclicals and Industrials), other have had two 5% drawdowns (Energy, Financials, Consumer Staples and Utilities). Interestingly, the sectors with the most drawdowns are perceived to be the most defensive ones. Energy is the only sector currently in a 5% drawdown (down 10.50%, but up from negative 23.26% at its worst on 8/17/17).

# of 5%+ Drawdowns over past 400 trading days…

Below is the spreadsheet if you want to look at the daily data or adjust the drawdown trigger amount.

Besides feeding our curiosity with data, an important takeaway for investors is that although the overall market may look boring as a whole with its low volatility and daily zero to 20 basis point moves, below the surface there is plenty of movement occurring. For active managers this is a great environment to invest in if you can pick the right sectors and individual names to own and not own (or even short).

Click here for the spreadsheet of daily data