Stock Market Crash: This Number Is Terrifying Wall Street Analysts

Stock Market Collapse: 5% Single-Day Plunge ComingWe’re “Overdue” for a Stock Market Crash: Analyst

1,698 days. That’s how long it’s been since the last time the stock market crashed five percent or more in a single day. Now, one Wall Street analyst says this could be a problem.

Nicholas Colas, chief market strategist at ConvergEx Group, notes that the last time stocks fell by at least five percent in one day was August 2011. Based on his research, investors are due for a big drop in equity prices.

“These opportunities have arisen 22 times for the S&P thus far and occurred about every 2.5 years, or four years when excluding an abnormally choppy 2008,” Colas said. “Therefore we are overdue for another, which is not an unreasonable expectation given the heightened volatility this year.” (Source: “A 5% one-day drop in S&P 500 is ‘overdue,’ says strategist,” The Globe and Mail, February 3, 2016.)

At the current level of the S&P 500, a drop of five percent would knock off almost 100 points from the index. So far this year, the largest one-day drop was 2.5% on January 13, and the last time the market saw a drop of five percent or more was in August of 2011.


But timing a stock market bottom is like trying to predict when an asteroid will hit Earth—it will eventually happen, but when?

For the patient investor, buying stocks after a five-percent dip will pay off huge rewards over the long-term. According to data compiled by ConvergEx, if an investor bought the S&P 500 index right after the session close of a five-percent dip, the investor would get an annual return of 19% on average.

Since 1957, there were 22 days of dips of five percent or more and of those, only four turned out an annual negative return. If an investor were to hold the index for five years, gains would be 75% on average. (Source: Ibid.)

Most recently, when the S&P 500 dove 6.7% on August 8, 2011, the index rallied 25% after a year.