A historic year in the economy, world, and markets was capped off by a historic recovery for the S&P 500. The S&P 500 finished 2020 up 16% (ex. dividends), but more impressively, up 67% from its low in March.
This rebound marks the largest single-year trough to peak recovery in S&P 500 history (since 1957). For reference, following the financial crisis the market bounced off its March lows to finish the year up just under 67%.
For more context, below are the S&P 500’s 10 highest intra-year peak to trough recoveries since 1957.
Capitalizing on market performance requires discipline
However, this performance was not “free”. Investors had to withstand a 34% equity drawdown at the beginning of the year, a recession, a global pandemic, and an economic shutdown. On top of that, market volatility hovered at 10 year highs as investors tried to make sense of economic news, fiscal/monetary stimulus, and COVID outbreaks.
And yet a disciplined investor that remained invested throughout the crisis was rewarded with a strong year of market performance, and more importantly, progress toward their long-term goals. Investing requires discipline and patience – not every year will be like 2020, and there will be times where the recovery from the market trough takes years, not days.
2020 Key Market Statistics
|2020||Avg Since 2009|
|S&P 500 Performance||+16%||+15%|
|S&P 500 Intrayear Decline||-33%||-14%|
|S&P 500 Peak to Trough Recovery||+68%||+28%|
|S&P 500 Sector Return Dispersion||76%||36%|
Note: Sector dispersion calculated as: Best performing – Worst performing sector.
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors.
The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Past performance is no guarantee of future results. Investing involves risk; principal loss is possible.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
A word on risk
All investments carry a certain degree of risk, including possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Equity investments are subject to market risk or the risk that stocks will decline in response to such factors as adverse company news or industry developments or a general economic decline. Debt or fixed income securities are subject to market risk, credit risk, interest rate risk, call risk, tax risk, political and economic risk, and income risk. As interest rates rise, bond prices fall. Non-U.S. investments involve risks such as currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks are magnified in emerging markets. This report should not be regarded by the recipients as a substitute for the exercise of their own judgment. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.