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 commentary reflects the personal opinions, viewpoints and analyses of the author providing such comments, and should not be regarded as a description of advisory services provided by Defiant Capital Group or performance returns of any Defiant Capital Group client. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Defiant Capital Group manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary.
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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.