Mondial Chart of the Week: How fast can a bear run? 📈

(Source: Momentum Global Investment Management)

28 June 2020


What this chart shows

This week’s chart shows the recent history of post trough recoveries that have followed a noteworthy sell off in the S&P 500 index. In this chart we have used daily data going back to the start of the millennium, capturing the last 20 years’ worth of S&P performance.

The axes show both the total return that was generated from trough to the next peak (and includes bear market rallies – not necessarily a full drawdown recovery) and the recovery length (in business days).

As seen in the chart the two episodes that stand out most are that of the rally in 2009 following the Global Financial Crisis and the most recent one in March of 2020, both of which saw a rally of more than 40%. In comparison to the other recoveries these rallies have also been sharper than others seen including those that followed the December 2018 sell off and the bubble in 2001.

Why this chart is relevant

This chart serves to highlight just how sharp the “bounce back” has been since the markets bottomed on the 23rd March. In the first three months of the year the S&P 500 index plummeted by more than 30% as a result of Coronavirus to levels last seen in 2017. Roughly one month from the start of the market sell off markets staged a remarkable recovery and proceeded to gain over 45% in less than three months.

The questionable factor here is that in the space of three months the S&P index appears to have largely brushed aside any future worsening or second wave of the virus, and the economic ramifications that this could have in terms of company earnings and sales.

This leads to the argument that the US market looks ‘fully priced’ today and is failing to discount further fallout from the global pandemic, but only a very brave (or foolish) person would try to outrun a bear in full stride.

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