Any year like 2022？
History doesn't always repeat itself, but it often rhymes. After comparing the $S&P 500 Index(.SPX.US$ to the YTD pattern of prior years, Bespoke Investment wants to see which ones are the most similar to 2022 in the bear market corrective phase.
1. What does history say could happen to stocks in 2022?
The table below lists the ten years with the highest correlation coefficient in closing prices between their YTD closing prices and this year. For each year, we have also included the YTD performance of the S&P 500 (through 5/16) as well as its performance for the remainder of the year including the maximum gain and loss.
• Of the ten years shown, the S&P 500 traded higher over the remainder of the year just four times for an average gain of 1.1% (median: -3.0%). That compares to an average rest of year performance of 4.9% (median: 7.2%) for all years since 1928.
• Surprisingly, half of the years listed also were mid-term election years (gray highlights). Performance in these years was pretty similar to the overall returns with positive rest of year returns just two out of five times.
The charts below compare the S&P 500 so far in 2022 to each of the years with the highest positive correlation over the same YTD period. Looking through the charts, some of the YTD patterns of prior years like 1970,1941, I960,1966 look very similar to 2022 so far, while others are less similar.
2. Past S&P 500 bear markets
The S&P 500 (5/23) plunged to 3901.36, putting it less than 2% away from 3837.25. That level would mark a 20% drop from the Jan. 3 high. And it puts the risk of a bear market on the table.
The table above lists the 14 prior S&P 500 bear markets since WWII (based on 20%+ declines on a closing basis with no rally of 20%+ in between).
• On an average basis, it typically takes the S&P 500 244 days to reach the 20% threshold for a bear market, so at the current rate of just 131 days, there's still plenty of time to reach the20% threshold.
• Once the S&P 500 reaches the 20% threshold, though, forward returns tend to be better than average, especially over the following year, and in more than half of the fourteen bear markets, the low was within two months of the 20% threshold being reached.
3. Sector performance notes in the past three bear markets
On a sector level, all 11 S&P 500 sectors dropped during the past three bear markets according to data from S&P Global Market Intelligence, S&P Dow Jones Indices and MarketSmith. And some of the plunges were noteworthy. The $The Technology Select Sector SPDR® Fund(XLK.US$ plunged more than 55% on average in the past three bear markets, they're down roughly 25% this year already. The $Financial Select Sector SPDR Fund(XLF.US$ dropped more than 50%, so far this year, they're down 16%.
4. Top individual notes in the past three bear markets
The data from S&P Global Market Intelligence, S&P Dow Jones Indices and MarketSmith show that eight stocks in the S&P 500 posted strong average gained during past recent bear markets. They all posted 50% or higher average gains in the past three bear markets since 2000.
Source: Bespoke Investment, S&P Global Market Intelligence, S&P Dow Jones Indices, MarketSmith, moomoo
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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