David Hernandez, CFA
The S&P 500 hit its recent peak on February 19th, 2020. Just sixteen trading days later it entered bear market territory and by March 23rd, the S&P 500 was down 33.2% from its all-time high. The intensity and speed of the sell-off surpassed both 1987 and 1929, two infamous years in investment history. Since March 23rd, the S&P 500 has rallied 27.4% through April 14th prompting the question: have we already seen the market bottom?
Identifying a market bottom is a near impossible task, one that is much easier with hindsight. Most bear markets see stocks rally 10% or more before falling back down and hitting a new bottom. The Global Financial Crisis produced five such bounces before finding its floor in March 2009. Near the turn of the century, the Tech Bubble produced three “false” rallies. Based on these data points, history would tell us that there are still further losses ahead. However, every bear market is unique and this one certainly fits that bill. Given the speed of the decline, might we see a faster recovery? The answer to that question is likely predicated on how well the spread of COVID-19 is controlled and whether we see a second wave of infections.
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