The S&P 500 could do something this quarter it hasn’t done since the Great Depression. Yesterday, we looked at what happens after the S&P 500 is up five straight weeks; we also mentioned that after being down 10% for the year at the February lows, it is now green. Today, we’ll take a closer look at that reversal.
On February 11, 2016, the S&P 500 was down 10.5% for the year, but it has come all the way back to positive, and as of yesterday was up +0.4% for the year. Going back to 1928, only eight years have ever been down at least 10% and then finished in the green by the end of the year. Obviously, 2016 isn’t over yet and there is plenty of time for market moves in either direction; however, this statistic shows just how rare it is for a year to make a comeback after being down 10%.
Source: LPL Research, FactSet 03/21/16
Now, here’s the interesting part: The S&P 500 didn’t need a full year to do this round trip—it did it in one quarter! Should the S&P 500 close out the first quarter in the green, it would be just the second quarter since 1928 to be down more than 10% at one point and close higher. In fact, you have to go back to the fourth quarter of 1933 for the last time a quarter saw a reversal like this. Below are the largest quarterly reversals since 1928.
In conclusion, this type of volatility and a reversal of this magnitude are extremely rare, and in a word, historic.
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