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Shocks to the System: A Look At Market Declines and Recoveries Since WWII

Wall Street has been aware of a possible default by Greece, or even its exit from the European Union (EU), for months. Most have embraced the cynically optimistic viewpoint that Greece and its creditors will either kick the can down the road for a few months or will arrive at an 11th hour compromise. Despite the ample advanced warning, one can’t help wonder what will be the magnitude of the market fallout?

Market Declines and Recoveries Since WWII

The U.S. stock market has weathered a variety of unanticipated shocks over the past 70 years. Examining a (non-exhaustive) list of events that would be categorized by many as “market shocks,” we find that the initial shock sent the S&P 500 down a median of only 2.4% for all observations during the subsequent trading day. Even more encouraging was that following the initial response, the bottom of the shock-induced decline was reached in only eight days, and the “500” recouped all that it lost in just 14 days.

The U.S. stock market has weathered a variety of unanticipated shocks over the past 70 years. Examining a (non-exhaustive) list of events that would be categorized by many as “market shocks,” we find that the initial shock sent the S&P 500 down a median of only 2.4% for all observations during the subsequent trading day. Even more encouraging was that following the initial response, the bottom of the shock-induced decline was reached in only eight days, and the “500” recouped all that it lost in just 14 days.

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