Following up on a year like no other

  • 2020 truly an exceptional year for stocks
  • The magnitude of the market's V-shaped rebound has few parallels
  • Similar events that do exist paint a mixed picture

What can you expect after years like 2020?

It’s a difficult question to answer, since 2020 was, in many respects, truly a year without precedent.

When the S&P 500 (SPX) closed at a new record high of 3,699.12 on December 4, it marked a 60.5% gain from March 20—the index’s largest-ever gain in a 37-week period. In fact, there have only been a few other 37-week rallies larger than 50% over the past six decades, and as soon as you look for even marginally comparable rallies that were also preceded by eight-week, 30% sell-offs, like this year’s…well, the list doesn’t get any longer.

But that doesn’t mean there aren’t any precedents. It’s an interesting thing: When you look at the SPX’s 50 biggest 37-week moves since 1957, which ranged from 32.6% to this year’s 60.5%, you find these rallies occurred in just a relative handful of years (1971, 1975, 1980, 1983, 1986, 1987, 1999, 2009, and 2010), and were often part of the initial reversals off what turned out be significant long-term lows.

For example, the following chart shows two of these 37-week moves from the 1970s—the 38.5% rally that followed the March 1970 low, and the 40% rally that emerged after the 1973-74 bear market low:

S&P 500 (SPX), 12/30/68–12/27/76 (weekly). That 70s Market: Big 37-week rallies off major lows.

Source (data): Standard & Poor's

The chart highlights two key characteristics common to many of these moves:

1. Although both rallies kept going a little while longer after hitting the 37-week mark, they were interrupted by fairly significant pullbacks within a couple of months.

2. However, in both cases the market also resumed its uptrend and posted significant gains over the next year or so.

The numbers support this general picture: While the SPX’s median six-month return is around 4.5%, its median gain after the big 37-week rallies was only 0.10%. A full year later, though, its median return was a little above 8%, which is not too far removed from its long-term average.1

As always, there were exceptions. The SPX barely paused after rallying more than 34% in the 37 weeks ending February 18, 1983 (the real beginning of the 1980s bull market), for example, and a year after its 1987 rally the index was still in the red.

But overall, the market’s typical behavior after these events may be, on the whole, relatively encouraging for bulls: Stocks often kept climbing after rallies like the one that unfolded this year, but they rarely did so without experiencing some significant setbacks in the process.


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1 Reflects S&P 500 (SPX) weekly price data, 1957–2010; "Six-month" and "one-year" changes represent 26-week and 52-week closing price moves, respectively. Supporting document available upon request.

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