When a tail event isn’t actually a tail event…
Via Morgan Stanley
Large equity drawdowns are more common than you might think: Start at any date since 1950,and the likelihood of the S&P 500 being 15%+ lower after 12 months is 8%. But that ignores an important scenario. What if stocks drop more than 15%, only to recover before the year is out? Allow for that (i.e., down 15% or more from current levels at any point),and the likelihood rises to 18%.
