The SPX Hasn't Done This Since 1974

While the SPX cratered in 2022, the VIX didn't respond normally

Senior Quantitative Analyst
Jan 5, 2023 at 8:00 AM
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Let’s get one thing out of the way; 2022 was an awful year for stocks. The S&P 500 Index (SPX) fell nearly 20%, snagging its fourth-worst year since 1949. But that was then, this is now. The table below shows how the next full year tended to perform after years in which the S&P 500 lost double-digits. The last two columns break up the next year return by first and second half.

The three years worse than 2022 saw huge bounce-back years, with the S&P 500 gaining over 20% each time. Looking at all the years in the table, however, the S&P 500 slightly underperformed the other years (years after it did not fall 10% or more). The first half of the next year also slightly underperformed other years.

SPX Worst Years

This week I’ll look at some daily S&P 500 stats for 2022 to see why it was such a bad year. I’ll also unpack the Cboe Volatility Index’s (VIX) odd movement this year in the context of how you would expect, given the terrible year for stocks.

The table below shows daily statistics for the S&P 500 for each year since 2000. We see the 19.4% loss last year was the worst year since 2008. Only 43% of the trading days in 2022 were positive, the lowest figure in the table. Going back to 1949, only 1974 had a lower percentage of positive trading days, at 41.5% (in 1974, the S&P 500 was down 30%).

Almost half of the trading days in 2022, 49%, were index moves of at least 1% either up or down. Of that 49%, 63 days were down at least 1% and 59 days were up at least 1%. So, about half of the days were 1% moves and those were split close to 50:50 between higher and lower. Not only were there a lot of down days compared to up days, but the downside moves were bigger on average than the upside moves (0.63% vs. 0.56%). That’s ultimately why 2022 was such a poor year for stocks.

SPX Since 2000

What’s Up With the VIX?

There has been a lot of chatter about the VIX being relatively unresponsive to the market turmoil over the past year, and the table below highlights this phenomenon. We have daily VIX data since 1994. The table shows the ten years with the fewest positive VIX daily moves. The VIX measures implied volatilities of S&P 500 options and typically moves in the opposite direction of stocks. That’s why it’s often referred to as the “fear gauge.”

With the S&P 500 down so many days in 2022, you would expect the VIX to have a high number of up days. Last year, however, saw the second least number of VIX ‘up’ days since we have data. Only 2009 saw fewer days higher for the VIX, and that was the recovery year from the financial crisis in which 56% of the days were positive for the market, with the S&P 500 gaining over 20% on the year. Every year in that table, except last year, saw over half the days positive for the market.

The last two columns show the direction of the VIX given whether the S&P 500 Index was up or down. The last column is especially interesting, showing that 34% of days that the S&P 500 was negative, the VIX was also negative. Typically, the VIX is down only about 20% of the time when stocks are down. Last year’s figure of 34% is the highest percentage since we have data. What that means is that investors hedging stock portfolios with short-term VIX options in 2022 had a more disappointing year than expected.



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