Stock market drop in late 2018
Q4 2018 sell-off: from September 20, 2018 to December 24, 2018.
Updated
What happened?
Fed rate hikes and the trade war with China caused a fall of nearly 20% in the S&P 500 in three months. The Fed’s pivot in early 2019 reversed it. For this analysis, the episode runs from September 20, 2018 to December 24, 2018.
What would Crisis Monitor have shown?
Recalculating the index each week with the data available at the time, it stood at 5 out of 100 when the decline began and peaked at 23 in Dec 2018. The index did not reach Alert (35).
This is a reconstruction made after the fact using weekly data: it helps show how the indicators behave, but it does not guarantee that things will happen the same way again.
How did the data move in that crisis?
From one year before to the end of the crisis. The vertical line marks when it began; the dashed red line is the level beyond which the data point becomes a concern.
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Which data points warned first?
One data point entered the stress zone before the crisis began: stock market fear (VIX).
Gold and copper are not part of the index, but they help show fear and activity: see how they moved on the gold and copper pages.
The first time each data point entered the stress zone (score 66 out of 100), searching from 12 months before the start. “Before” = it warned before the crisis began; “after” = it reacted late. Note: after another crisis, some data points were still elevated from the previous one.
| Indicator | How does it usually behave? | When did it first become a concern? | When did it warn? | Moment of peak stress |
|---|---|---|---|---|
| Stock market fear (VIX) | Moves with the crisis | Feb 2018 | 7 months before | 33.46 Feb 2018 |
| Unemployment benefit claims | Usually warns early | Never became a concern | — | 21.8% Sep 2017 |
| Long vs short rates (2 years) | Usually warns early | Never became a concern | — | 0.12% Dec 2018 |
| Financial stress (St. Louis) | Moves with the crisis | Never became a concern | — | 0.35 Apr 2018 |
| Copper vs gold | Usually warns early | Never became a concern | — | -15.2% Dec 2018 |
| Credit of ordinary companies | Usually warns early | Never became a concern | — | 2.29% Dec 2018 |
| Store sales | Moves with the crisis | Never became a concern | — | 1.0% Oct 2018 |
| Long vs short rates (3 months) | Usually warns early | Never became a concern | — | 0.40% Dec 2018 |
| Factory output | Moves with the crisis | Never became a concern | — | 0.9% Sep 2017 |
| Ease of borrowing | Usually warns early | Never became a concern | — | -0.43 Dec 2018 |
| Consumer sentiment | Usually warns early | Never became a concern | — | -2.8 pts Feb 2018 |
| Dollar strength | Moves with the crisis | Never became a concern | — | 97.54 Nov 2018 |
| Recession probability | Moves with the crisis | Never became a concern | — | 0.4% Sep 2017 |
| Rise in unemployment (Sahm rule) | Moves with the crisis | Never became a concern | — | 0.03 Sep 2017 |
| Credit of risky companies | Usually warns early | FRED only publishes the last 3 years of this series (ICE license) | ||
Does the current moment resemble that crisis?
Score from 0 to 100 for each area, today and at different moments of that crisis.
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How does everything look now? See the live dashboard.