The trading action in the SPDR S&P 500 ETF Trust (NYSE:SPY) since the March lows has been surprising to many investors. But upon closer examination, the 2020 rally has mirrored the 2009 recovery from the financial crisis to an eerie degree.
Throughout the year, DataTrek Research co-founder Nicholas Colas has been tracking the 2020 S&P 500 trading action and comparing it to the stages of the 2008 sell-off and the 2009 market recovery from the financial crisis.
The S&P 500 is now 143 days removed from its March 2020 lows and is up 57% from its bottom. Exactly 143 days after the S&P 500 bottomed in 2009, the index was up 56.8% from its lows.
Related Link: US GDP Drops 31.4% In Q2, But Economists Expect Record Recovery
Different Crises, Same Results: The 2020 recovery surged ahead of the 2009 pace through August, but the market's September hiccup now has it back in lockstep with the 2009 recovery.
The sources of the 2009 and 2020 economic crises were very different, however, the fiscal stimulus measures taken to combat the crises and the investor reaction to them have been extremely similar, Colas said.
“It shouldn’t look this similar, but it does. It’s almost as if markets just assess how effective fiscal and monetary policy are in addressing a crisis, and don’t even care about the cause of the problem or which political party is in charge of addressing it,” Colas said.
S&P 3,800: The good news for investors who expect the correlation to continue is that the 2009 playbook is calling for another 5% upside for the S&P 500 before year’s end. That pace would put the S&P 500 near the 3,800 by the end of 2020.
Unfortunately, investors are now approaching a key difference between 2009 and 2020 — the election. Colas said election-related volatility and news related to the pandemic could potentially trigger a divergence between the 2020 and 2009 recoveries.
Benzinga’s Take: The huge rebound in the S&P 500 since March has surprised many investors given the economy is still struggling to deal with the fallout from the pandemic lockdowns. So it’s comforting to know just how close this year’s recovery has been to 2009 and how well the market performed in the second half of 2009 and the years that followed.