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SEEKING ALPHA‘s  writes:

– The spread of the coronavirus outside of China has weighed on risk assets globally.

– The major U.S. stock market gauges each fell more than 3% Monday.

– Daily returns this poor are rare, but not unprecedented.  Volatility and sharp down days tend to cluster.

– Returns after down days of this magnitude tend to be positive, but exhibit tremendous variability.

Stocks caught a virus on Monday, sending the three major domestic benchmarks down 3% each. The -3.35% return for the S&P 500 (SPY) was the worst daily performance since February 2018. After a day as rough as Monday, a couple of obvious questions come to mind. How bad was the trading session historically? What tends to happen after days with similarly poor returns?

How Bad Was Monday?

Dating back to the beginning of 1928 – a period covering 23,146 trading sessions – Monday’s move for the S&P 500 and its predecessor indices was the 235th worst performance in percentile terms on record. Roughly 99% of days over that time period have been better than yesterday.

Broadening this population slightly to include all trading days where the S&P fell more than 3%, there were 326 occasions. A return of -3% or worse occurred on roughly 1.4% of all trading sessions.

If returns were normally distributed, you should expect a day as bad as Monday to occur about 3.5 times per year. Of course, bad days tend to cluster in weak economic environments. In the graph below, I have depicted the number of times the market fell more than 3% on a trading day by calendar year.

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