Vertigo
Vertigo
Analyzing drawdowns and return performance for the Mexican stock market.
Recently, we stumbled upon a chart that visualized the percentage of years in which the S&P 500 experienced a drawdown of 5% or more during a calendar year.
In short, the chart showcased that since 1928 a whopping 96% of calendar years saw corrections of at least 5% for the global benchmark index, more than 60% saw drops of 10% or more, and 40% presented corrections that exceeded 15%.1
This piqued our curiosity, so we decided to replicate this analysis for the Mexican market.
Here’s what we found.
Just before we dive into the article, here’s a chart aiming to illustrate what a drawdown means using real data from the Mexican IPC for the year 2019.
If you look at the data below, you can see that the maximum drawdown is equivalent to the worst possible bet you could have made on a stock during a given period. In this case, a loss of 15.3%.
Turning back to the chart that inspired this post and benchmarking it against the Mexican flagship index we can see a similar pattern — albeit with a slight higher volatility for the IPC (or MEXBOL).
Drawdowns are completely natural in the stock market. However, the risk tolerance investors need to endure plays a key role in realizing returns whenever things get tough.
In the case of the Mexican index, maximum drawdowns have been greater than those of the S&P 500 in just over half of the years analyzed (2000 to 2024). During this period, the largest absolute difference between corrections for both indices occurred in the year 2000, when the IPC had a drawdown 19 percentage points deeper.
Conversely, the S&P 500's largest difference against the IPC during these years occurred in 2002, with an absolute difference just shy of 7 percentage points.
Despite boasting annualized returns of over 8% during the past 20 years, the Mexican IPC has struggled to present decent returns for investors in recent years. Underperforming the S&P in most comparable timeframes.