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How did last year’s equity market volatility compare to history?

The past calendar year provided a historically large number of sizeable daily swings in the equity market.

2022 was a volatile year for equities chartConditions in 2022 were characterized by a convergence of risks. Geopolitical risk skyrocketed as Russia invaded Ukraine in February and China continued its saber rattling with Taiwan, sending commodity prices sharply higher. In addition, the Fed embarked on a tightening policy that would prove to be the fastest and most aggressive hiking cycle in decades, to conquer a long-dormant economic indicator — inflation — that was dominating headlines and dinner table conversations. The result? Volatility.

As shown in the chart above, the S&P 500 experienced intraday moves of at least 1% (up or down) 122 times in 2022, equating to nearly half of all trading days for the year. To put this number in context, it was more than double the average since 1950. It also exceeded the number of +/-1% moves in 2020, a year characterized by a global health crisis and unprecedented economic shutdown. (It’s worth noting that there were more extreme +/-3% moves in 2020, when the economy shut down virtually overnight and subsequently soared back.) Still, the last time daily equity market volatility was greater was during the global financial crisis in 2008.

Of last year’s >1% moves, just over half were declines, reflecting the heightened downside associated with equity repricing to reflect sharply higher interest rates, inflation, and a geopolitical risk premium. For investors, those frustrations were exacerbated by challenging fixed income conditions, rising rates, and negative returns.

The bottom line? 2022 was a historically volatile year for equity markets, stemming from a strong cocktail of geopolitical, macroeconomic, and policy uncertainties. There is a silver lining for long-term investors as we discuss in our accompanying piece.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.

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