The Bull Market Turns One – March 24, 2021

The major stock market indexes hit bottom on March 23, 2020.

Data points

  • The S&P 500 Index2 had peaked just one month prior.
  • The decline of 34% in four weeks was the fastest on record.

The volatility that ensued during the bear market was caused by an unprecedented lockdown of the economy and the inability of investors to accurately handicap the depth and duration of the recession.

There weren’t any past precedents to guide investors.

Additional data points

  • The bear market was the shortest on record.
  • The S&P 500 Index has rallied 76% from its low.
  • The rally is the strongest following the six bear markets that have incurred a 30% or greater decline since WWII.
  • The average rally after one year: 41%
  • The average gain in the second year: 17%
  • The average maximum pullback in the second year: 10%

Sources: Charles Schwab, St. Louis Federal Reserve, LPL Research. The S&P 500 Index is an unmanaged index that cannot be invested into directly. Past performance is no guarantee of future performance.

Investor’s corner

Explosive rallies can occur in the wake of explosive declines. The rally in the S&P 500 one year after the market hit bottom in 2009 was 69%.

Sentiment is typically very negative as stocks form a bottom and move higher, which discourages some investors from taking part.

A comprehensive financial plan does not eliminate risk but helps manage risk. The plan is a tool, providing a roadmap that puts you on a path towards your financial goals.

Created 2021-03-24 21:31:38

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