WHITE PAPER: “When the Dust Flies,” PGIM

The following research study was submitted by PGIM

This white paper includes comments from Bruce Phelps, Head of PGIM’s IAS group, who explains the premise there are two types of volatility events: “spikes” (sudden increase in volatility) and “post peaks” (a period of high volatility followed by volatility returning to its pre-peak level).

The report’s key takeaways around asset class performance in light of such events include:

  • During Spike Events – The spike event period generally has poor equity market performance. On average, the S&P 500 has a cumulative two-month loss of -8.2%. However, the equity market generally recovers quickly, returning to its pre-spike level, on average, seven months after the spike month.
  • Pre- & Post- Spike Events – On average, equity markets displayed similar 21-month cumulative performance both before and after spikes. The average S&P 500 cumulative monthly total return at the end of the pre-spike period was 20.3%, and a bit higher, at 26.7%, in the post-spike period.
  • Market Performance during Post Peak Events – In the months immediately surrounding the peak event, equity market performance is typically poor with an average cumulative equity market return of -6.6% around the peak.

For the complete study, please click here

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