What’s happening in the stock market is not unprecedented: Morning Brief

Sam Ro · Contributor
4 min read

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Thursday, October 15, 2020

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How 2020 looks remarkably like 2009

Much has been made about the sharp recovery in the stock market as the economy lags.

Generally speaking, that’s always been the case as the stock market is a leading indicator. In other words, it’s largely a reflection of things to come. Also, the stock market represents larger companies, has international exposure, and so on; but we’re not gonna get into that here. For the purposes of this discussion, let’s accept that the differences between the stock market and the economy today are similar to what they were a decade ago.

All that said, the rally in the stock market is notable. Since its March 23 low, the S&P 500 (^GSPC) is up a whopping 57.0% in the 143 trading days that followed.

There are a lot of things about 2020 that has been unprecedented. However, the stock market’s rebound is not one of them.

In an email to his subscribers on Wednesday, Nicholas Colas, co-founder of Datatrek Research, noted that the market was following a path remarkably similar to what we saw in 2009, which is when stocks bottomed during the financial crisis.

He offered this chart overlaying the post-financial crisis market starting at the low set on March 9, 2009 with the COVID-19 pandemic market recovery, which started on March 23, 2020.

“On the comparable day in 2009, the index was 56.8% higher than the March 9th lows,” Colas observed.

The S&P 500 today is following a similar track it did in 2009. (Datatrek)
The S&P 500 today is following a similar track it did in 2009. (Datatrek)

The degree to which the market today is mirroring that 2009 experience is truly remarkable.

“The idea is that all crises are alike when it comes to stock prices,” Colas wrote. “They start with markets falling off a cliff, bottom when it is clear that fiscal/monetary stimulus is coming/up to the task, and then track similar paths higher as investors grow comfortable that a real recovery is at hand.“

Colas acknowledged that on the “plus side,” the S&P continued to rally through December 2009. But as always, this is not to say the market will continue to follow the same path.

“On a more cautious note, there was obviously no US general election in 2009 and nor was there a global pandemic to address,” he said. “On top of that, it was Financials leading us out in 2009 but it’s been Tech in 2020.“

Frankly, the fact that the S&P 500 would track like this is very odd.

“It shouldn’t look this similar,” Colas said, adding, “but it does.”

By Sam Ro, managing editor. Follow him at @SamRo

What to watch today

Economy

  • 8:30 a.m. ET: Initial Jobless Claims, week ended October 10 (825,000 expected, 840,000 during prior week)

  • 8:30 a.m. ET: Continuing Claims, week ended October 3 (10.55 million expected, 10.976 million during prior week)

  • 8:30 a.m. ET: Empire State Manufacturing Index, October (14.0 expected, 17.0 in September)

  • 8:30 a.m. ET: Import Price Index MoM, September (0.3% expected, 0.9% in August)

  • 8:30 a.m. ET: Philadelphia Fed Business Outlook Index, October (14.5 expected, 15.0 in September)

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