"Fast Moving Markets"
The recent speed of U.S. stock market movements up and down is unprecedented. The rapid selloff which started in February and ended 33 days later in March was the fastest peak to trough correction in market history. The subsequent rally off the lows that followed was equally impressive in speed and magnitude, recovering most of the losses in less than two months.
As we pointed out in our April market reflection, Bear Markets and Rebounds, bear markets are painful and the length of time to recover from a bear market varies from three months to three years. The April market reflection also noted bear markets tend to be shorter in length than bull markets and proper patience is required during periods of market stress. Historically, that patience has led to greater future prosperity.
Currently, the stock market is roughly 5% off its record high set on February 19, 2020 and is basically unchanged year-to-date. This is remarkable considering global economies shut down and are now only in the beginning stages of reopening. In addition, the swiftness of the market recovery is also extraordinary. The chart below highlights the largest 50-day market gains ever. The recent fifty-day period ending June 3rd, 2020 (red arrow) is the largest fifty-day gain ever for the market, returning a whopping 37.7%.
Another interesting fact from the chart above is the positive returns the market experienced after these fifty-day gains. In fact, the market continued to rally six and twelve months after these fifty-day gains in all instances (gold circles).
Recent history shows how painful attempting to time the market can be if your timing is off. The speed and ferocity of stock markets often humbles even the best investors. As the stock market sold off aggressively, GI portfolio managers patiently held positions and added securities we felt would benefit from a market rebound. We also have the ability to be nimble and introduce new portfolios when opportunity presents itself. The introduction of the Contrarian Choice Portfolio at the end of March is a great example of this. We constructed this concentrated portfolio to invest in stocks that are temporarily out of favor and provide us with a great opportunity to own quality names on sale.
Investing is a difficult process. Swift and volatile movements in the stock markets don’t make it any easier. We still believe that a thoughtful investment plan that matches your risk and return objectives over time is the best path to successful investing.