Stock recoveries: How sharp is sharp?

March was a brutal month for the US stock market. The S&P 500® Index recorded three daily declines that were among its 25 largest single-day percentage drops since the stock market crash of 1929. The severe declines that began in earnest on March 9 came 11 years to the day after the upward swing in 2009 that sparked a strong recovery and multiyear bull market.

March 16, 2020 saw the largest point loss ever for the S&P 500 Index, which was also the third-largest loss on a percentage basis for a single day. On each of the three worst days this March, the market bounced upward during the next session, but was down further a week later. The table shows this is not always the case after large, one-day losses. You may find some similarities and som e differences throughout market history. The market had a notable run since its March lows. What may be in store in coming months? Only time will tell.

The S&P 500® Index and recoveries

The S&P 500 Index and recoveries table

Sources: Shiller, Dow Jones, and Macquarie Investment management. Past performance does not guarantee future results. Charts shown throughout are for illustrative purposes only and not meant to predict actual results. Chart is for illustrative purposes and not representative of the performance of any specific investment.

What this means for investors:

While past performance is not an indicator of future results, historical returns can be helpful in placing extreme stock returns into perspective. Long-term investors may be able to take comfort in the fact that stocks have historically recovered significantly in the months and quarters following sharp losses.

Stock markets also tend to lead the economy, and often recover prior to signs of economic growth or upticks in business activity. What lies six months, or 18 months ahead for equity investors? If you have a long time horizon, we believe the best bet may be to stay invested and try to find out.


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IMPORTANT RISK CONSIDERATIONS

Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

The views expressed should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice.

Market risk is the risk that all or a majority of the securities in a certain market – like the stock market or bond market – will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.

Equity securities are subject to price fluctuation and possible loss of principal.

The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the US stock market.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

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