There’s no questioning that markets have been extremely volatile this year. Yesterday, the Nasdaq 100 tracking ETF (QQQ) declined by 3.0%, which for 2022, has not been a foreign occurrence. In fact, yesterday was the eleventh time this year that QQQ fell by at least 3%. Since QQQ began trading in 1999, this will be the fifth-highest number of 3%+ daily declines in the first half of the calendar year (top chart below). Although the number of 3%+ daily declines is still well below 2020 and dot-com era levels, it is still a significantly elevated reading. In fact, this year’s first-half pace has been well ahead of levels from 2008 and 2009 and is only three shy of the pace in 2020. 

Volatility has not been exclusively to the downside, though. On top of the 11 3%+ declines, there have been nine days so far in 2022 in which QQQ rose by at least 3%, bringing the total number of absolute daily moves of 3%+ to 20. This too ranks fifth of all years since 1999, falling five short of 2020 and 31 short of 2000.

Of all 260 3%+ daily declines in QQQ since 1999, 143 occurred between the start of 2000 and the end of 2002 (the unwinding of the dot-com bubble). During this time, QQQ fell a whopping 74.3%! The chart below shows QQQ since 1999, with the red dots marking each 3%+ decline.

QQQ’s performance following these occurrences is heavily skewed by the dot-com era weakness. While performance over the following week has been slightly better than average versus all periods since 1999, forward returns in the following one and three months have trailed the long-term averages. Since the end of the dot-com bubble burst (2003), forward returns following these occurrences looks much more attractive with QQQ averaging a gain of 44 bps (median: 54 bps) in the week following a decline of 3%+. Over the following month, QQQ has averaged a gain of 1.4% (median: 1.6%) and over the next three months has averaged a gain of 7.3% (median: 7.2%). The positivity rates over the following week, month, and three months have been 57.6%, 58.3%, and 74.5%, respectively.