No New Low in Sight For Jobless Claims Thu, Dec 19, 2019 Initial jobless claims remained elevated relative to recent history this week as the seasonally adjusted number came in at 234K compared to expectations of a decline to 225K. As shown below, the four-week moving average—which offers a better look at the overall trend by smoothing out this type of week to week volatility—has been grinding higher even before the past couple of weeks' swings. In other words, regardless of the more recent surge, claims have been trending higher in the past year. Given this, it has been some time since the four week moving average has made a new cycle low. In fact, the moving average is now 24K above the April low of 201.5K. As shown in the chart below, this is the widest spread between a weekly reading and the cycle low in more than a year, but there have also been prior times that the spread has been far wider such as in 2011, 2012, 2013, and 2017. Despite this, outside of April, most of the past year has seen claims fairly elevated above its lows. Expanding on this, while the distance between the last low and the current level could be worse, the current streak without a new low is now the second longest of the current cycle at 35 weeks long, passing the 34 week long streak ending in May 2014. If this continues for another seven weeks, it will take out the streak lasting 42 consecutive weeks ending in December 2012. Seeing as it has been so long since we have seen a new low in the 4-week moving average for claims, it shouldn't come as a surprise that 2019 has been relatively quiet on the new low front. In fact, there were only two weeks that saw a new low get put in place this year, both occurring in April. As shown in the chart below, no other year of the current cycle has seen so few of such weeks.
Last Trading Day of the Year: NASDAQ Down 15 of Last 19 Last-minute tax-loss sales, old sayings such as “year ends make great exits,” a desire to start with a clean slate; who knows exactly the answer, but the last trading day of the year has turned bearish over the last nineteen years. Since 2000, NASDAQ has the worst record, down 15 of 19 after advancing every last trading day of the year from 1971 to 1999. Russell 2000 has one additional gain for a record of 14 losses in 19 years. S&P 500 and DJIA are only slightly better. Average declines on the day range from 0.43% to 0.19%
January Almanac: Average Performance Slips in Presidential Election Years January has quite a reputation on Wall Street as an influx of cash from yearend bonuses and annual allocations typically propels stocks higher. January ranks #1 for NASDAQ (since 1971), but fifth on the S&P 500 and sixth for DJIA since 1950. It is the end of the best three-month span and holds a full docket of indicators and seasonalities. DJIA and S&P rankings did slip from 2000 to 2016 as both indices suffered losses in ten of those seventeen Januarys with three in a row, 2008, 2009 and 2010 and then again in 2014 to 2016. January 2009 has the dubious honor of being the worst January on record for DJIA (-8.8%) and S&P 500 (-8.6%) since 1901 and 1931 respectively. Last year, January was downright stellar after the worst December since 1931 for DJIA and S&P 500. In election years, Januarys have been weaker. DJIA and S&P 500 slip to number #8 while DJIA average performance dips negative. NASDAQ slips to #3, but average performance remains respectable at 1.7%.
Manufacturing Sector Sinks Further Into Contraction Fri, Jan 3, 2020 What's the bright side to the market weakness from news overnight that a US drone strike in Iraq killed Iranian General Qassim Soleimani? It took all the focus off of the December ISM Manufacturing report which came in weaker than expected and was all around bad just about any way you look at it! At the headline level, economists were expecting the ISM Manufacturing index to rebound from 48.1 up to 49.0, but instead of a bounce, we actually saw a decline to 47.2, which was the lowest level since June 2009. Commentary in this month's report was also weak. Outside of Textile Mills, where the outlook is positive, commentary around every other sector highlighted was negative with descriptions like shrinking, sluggish, and on the defensive dominating the commentary. Below we break down this month's report by each of the individual sub-indices. The biggest decliners relative to November were Production and Employment while Prices Paid saw the largest decline. Weak activity with rising prices? That's not an optimal combination! As mentioned above, Production saw the largest decline in December, falling to 43.2 from 49.1. That's the largest m/m decline since January 2012 and the lowest overall reading since April 2009. New Orders were also weak this month, and while the m/m decline wasn't large (less than a point), activity hasn't been shrinking at this rate since April 2009. On the employment front, activity also contracted from 46.6 down to 45.1. Employment in the manufacturing sector hasn't been this weak since January 2016. As if the weak activity in the Manufacturing sector wasn't bad enough, it was accompanied by rising prices. As shown in the chart below, the Prices Paid component increased five full points to 51.7 in what was the largest m/m increase in over two years (September 2017). All in all, this was just a lousy report!
U.S. Manufacturing Continues to Slide U.S. manufacturing health continued to slide, despite the United States and China moving closer to a limited trade agreement. The Institute for Supply Management’s (ISM) manufacturing Purchasing Managers’ Index (PMI) fell to 47.2 in December 2019. As shown in the LPL Chart of the Day, December’s reading was the lowest of the economic cycle, and its fifth straight month in contractionary territory (below 50). Underlying details of the PMI report were also discouraging. ISM’s forward-looking gauge of new orders fell to a 10-year low, signaling weak demand may continue to weigh on manufacturing over the next few months. “We had hoped to see some stabilization in domestic manufacturing with trade progress in sight, but Friday’s report showed the sector may take a while to bounce back,” said LPL Financial Chief Investment Strategist John Lynch. “However, we’re still hopeful that the manufacturing decline will bottom out at these levels, even if it takes some time.” We’re still constructive on economic fundamentals, even amid manufacturing’s malaise. Manufacturing has historically been a bellwether for the economic outlook, but its role in output has shrunk. Manufacturing accounts for about 11% of gross domestic product, according to Bureau of Economic Analysis data, so it’s unlikely the sector alone will drag the rest of the economy down. ISM’s PMI has dropped below 50 three other times this cycle without a recession materializing, and other key segments of the economy still look solid. There are also unusually circumstances to consider. Boeing Co. suspended its 737 Max airplane production on December 17, so there could have been a temporary weight on new orders and the overall PMI in December. Manufacturing’s decline is concerning, and bouts of weakness matter for corporate profits and capital investment. We’ll be watching to see if the ISM PMI falls to the low 40s, the PMI level that has historically been associated with recessions.
January Jobs Day: Historically Not a Pretty Sight Tomorrow morning the Bureau of Labor Statistics will release its Employment Situation report for December. Depending upon your preferred source, the consensus estimate is for a gain of approximately 160,000 net new nonfarm jobs. This is quite a bit lower than the 202,000 that ADP reported yesterday. Historically, the market has responded less than sanguinely to the jobs report released in January. S&P 500, NASDAQ, Russell 1000 and Russell 2000 have all posted average losses on the day in the last twenty years. S&P 500 and Russell 2000 both logged eleven losing years. DJIA and Russell 1000 have been up half the time while NASDAQ is the sole major index with more years up than down with an average loss of -0.12% but a median gain of 0.10%. Russell 2000 is the biggest loser down -0.34% on average and median.
January Off To Stronger Than Usual Start – But 2nd Half Is Weaker Stocks are off to a stronger that usual so far in January 2020 when compared in the chart above to the average performance over the most recent 21-year period. As of today’s close DJIA is up 1.41%, S&P 500 +1.61%, NASDAQ leads the pack +3.11% and the Russell 2000 was in the red until the past two day and is now up 0.44%. This is well above historical average performance in recent Januarys. The market was up nicely today until reports hit the newswires at about 1:30 pm ET creating uncertainty that the Phase 1 trade deal expected to be signed tomorrow between the US and China may be pabulum. The realization that the tariffs on Chinese goods may remain in place until after the election as the review process runs its course drove stocks lower this afternoon. The market gave back most of its early gains with only the Dow and Russell 200 eking out gains today. However, as you can see in the dotted lines so far in 2020 the indices are tracking the last 21-years rather closely. If the pattern continues to pan out this year, look for a little strength over the next two days. Then weakness has been prone to appear just after mid-month after the eleventh trading day with mild average losses from on or around the eleventh trading day to the fourteenth trading day.
Solid January Starts Not Rare, February Could Be Tepid Bullish sentiment is running high and why not. A new decade has begun, January has been bucking the recent trend of volatile performance and the market is trading at or near all-time record highs. Big round numbers like 29000, 3300 and 9000 are also emotionally satisfying. Our Santa Claus Rally and First Five Days indicators were both positive and the market is well on its way to completing a historically bullish January Trifecta. A positive January Barometer is all that remains to complete the January Trifecta. As of yesterday’s close DJIA was up 2.3% year-to-date. S&P 500 was up 2.79% and NASDAQ stood at 4.44%. Although these gains are above average, they are actually not all that uncommon by the thirteenth trading day of the New Year. Since 1901 (119 years), DJIA has been up 2.3% or more on the thirteenth trading day 33 times before this year. DJIA’s largest gain on the thirteenth trading day was 11.4% in 1976 (+17.9% for the full-year). S&P 500 has equaled or exceeded 2.79% on the thirteenth trading day 26 times since 1930 while NASDAQ has bested 4.44% 15 times since 1971. Depending on index, gains equal to or greater than this year come about approximately once every 3.3 to 3.6 years. 2012 was the last election year where all three indexes were up more on the thirteenth trading day than this year. In the following Seasonal Patten Charts of DJIA, S&P 500 and NASDAQ, we compare 2020 (as of yesterday’s close) to All Years and Election Years. Here it is clear that the market has gotten off to a solid start with well above average gains so far. Throughout 2019, the market tracked its historical patterns quite closely which suggests some mean reversion could occur this February as the month has been historically tepid for DJIA and S&P 500.
Sick Day for Sentiment Thu, Jan 30, 2020 Although there have not been any major clusters outside of China, the spread of the coronavirus has investors understandably worried. Price action has been choppy in response as the story continues to develop, but investor sentiment is moving lower. The weekly reading on bearish sentiment from AAII fell from 45.6% down to 31.98% this week. That 13.62 percentage point decline is the largest one week drop in bullish sentiment since early August when it dropped 16.78 percentage points. At that time bullish sentiment had fallen to an even lower 21.66%. The loss in bullish sentiment was picked up by the bears as bearish sentiment rose 12.09 percentage points to 36.86%. As with bullish sentiment, this was the largest one-week buildup in negative sentiment since early August, although it was only about half the size of the 24.14 percentage point rise in the summer. Additionally, sentiment has not become extended in any major way either for bears or bulls which are both now in the middle of their ranges. The shifts in bullish and bearish sentiment have also led the bull-bear spread to tick back into negative territory meaning a larger share of respondents to the AAII survey are reporting bearish sentiment. This snapped a 15 week-long streak with a positive bull-bear spread, and in the history of the survey dating back to 1987, there have only been 16 other streaks that have reached 15 weeks or more. Only a handful, though, have occurred within the past decade. This most recent streak tied the one that came to a close in March of 2018 but was only half the size of the streak ending at 31 weeks in March of 2015. Last week, neutral sentiment fell below 30% for the first time since the first week of 2019 and the week before that it snapped a 22 week-long streak above its historical average. Although it is still below its average, neutral sentiment picked up a bit this week rising back above 30% to 31.17%. Only slightly higher, it is still at the low end of the past year's range.
Russell 1,000 Most Heavily Shorted Stocks Wed, Feb 5, 2020 In Monday's Closer, we detailed the short squeeze in Tesla (TSLA) that has been playing out. Back in May, when short interest as a percentage of float for TSLA topped out at 33.16%, it was the third most highly shorted stock in the Russell 1,000. Today, you will not find Tesla in the top 10, 20, or even 30 of the most heavily shorted Russell 1,000 stocks. In fact, after rallying well over 100% so far in 2020, it is the 37th most highly shorted stock with 17.55% of the float short. Of the most heavily shorted stocks, TSLA by far is the largest with a market cap of $127.32 bn. The table below lists the 40 stocks in the Russell 1000 with the highest short interest as a percentage of float. Behind TSLA, the second-largest stock in terms of market cap of the stocks listed is Match Group (MTCH) which is less than a fifth the size of TSLA. Currently, MTCH is also the only stock in the Russell 1000 with more than half of its shares shorted (60.14%). That is after it was one of the top performers of the group last year, rising 95.79%. Some other big winners in 2019 which are now being bet against the most are Beyond Meat (BYND) that rose over 200% since its IPO, Carvana (CVNA) which rose 187%, Ubiquiti (UI) which rose over 93%, and Caesars Entertainment (CZR) which is also up over 100%. On the other hand, big losers like Range Resources (RRC), Antero Midstream (AM) and 2U (TWOU) continue to be bet against amidst major declines in the past year, and they have not found any respite so far in 2020. In terms of performance for most heavily shorted stocks so far this year, of the stocks listed below, the average YTD change is a gain of 1.3%. However, if you take Tesla (TSLA) out fo the mix, the average performance shifts to a decline of 1.75% as 23 of the 40 stocks listed are down YTD.
January Trifecta Spoiled by Coronavirus The market decline on the last day of January spoiled what would have been the fourth consecutive January Trifecta. S&P 500 finished January down 0.2% and thus the January Barometer was negative. Devised by Yale Hirsch in 1972, the January Barometer has registered ten major errors since 1950 for an 85.7% accuracy ratio. This indicator adheres to propensity that as the S&P 500 goes in January, so goes the year. Of the ten major errors Vietnam affected 1966 and 1968. 1982 saw the start of a major bull market in August. Two January rate cuts and 9/11 affected 2001.The market in January 2003 was held down by the anticipation of military action in Iraq. The second worst bear market since 1900 ended in March of 2009 and Federal Reserve intervention influenced 2010 and 2014. In 2016, DJIA slipped into an official Ned Davis bear market in January. Including the eight flat years yields a .743 batting average. This year’s combination of a positive Santa Claus Rally and First Five Days with a full-month January loss has only occurred eleven times (including this year) since 1950. In the previous ten occurrences S&P 500 was down six times in February with an average loss of 1.5%. However, over the remaining 11 months of the year, S&P 500 advanced 80% of the time with an average gain of 7.4%. Full-year performance was positive 70% of the time, but with an average gain of 2.9%.
Sentiment Sits Out The Rally Thu, Feb 6, 2020 As equities have rebounded from coronavirus fears in the past week, reaching fresh all-time highs, sentiment has not shared in the gains as it continues to hold a slight bearish bias. AAII's reading on bullish sentiment rose slightly from 31.98% last week to 33.87% this week. While higher than last week, it was not nearly as large an increase as you would expect given the market rebound. AAII's reading on bearish sentiment ticked down 1.64 percentage points to 35.22%. That is still well above the lows in the 20s that have been observed over the past few months. With both bullish and bearish sentiment little changed, the bull-bear spread remains in the bear's favor for a second week in a row. Neutral sentiment was also little changed this week falling just 0.26 percentage points to 30.91%. This week marked back-to-back weeks with a greater share of respondents reporting bullish or bearish sentiment than neutral. That has not been the case much over the past year as the last time neutral sentiment did not outweigh either bullish or bearish sentiment was the final week of December and the first week of January of last year. Again, although prices have moved higher in the past week, sentiment has not. While AAII results were little changed, another sentiment survey, the Investors Intelligence (II) sentiment survey is more prominently echoing a bearish bias. This survey's reading on bullish sentiment actually fell from 58.9% to 55.1%; the lowest since early December. Bearish sentiment from this survey, on the other hand, rose to its highest level (17.8%) since November. In addition to asking for bearishness and bullishness, the II survey also checks on the percentage of respondents that are "looking for a correction." Since the beginning of the data, it has averaged ~25%, but over the past decade, it has generally been higher, averaging 29.6%. More recently, though, these readings have been more muted, but the five percentage point increase this week on top of a 5.6 percentage point increase the week before has brought the indicator to 33.3%; its highest reading since the fall. In fact, up until this move it was below 30% for 15 consecutive weeks. While that is not any sort of extreme reading at ~33%—with a history of much higher readings over the past several years—that aforementioned streak is perhaps more notable. Since 2000, there have only been 13 other such streaks in which Investors Intelligence's reading on "looking for a correction" rose above 30% after not having done so for 15 weeks or more. The last time this happened was in October of 2018. Following past occurrences, returns for the S&P 500 have actually been stronger than normal one week, one month, and 6 months out, but 3 months and one year later, the market has experienced underperformance. Granted, one year out the S&P 500 has been higher 79.92% of the time.
Does A Lower January Have Bears Smiling? Stocks got off to a nice start in 2020, until the late January selloff due to the coronavirus outbreak fears. In the end, the S&P 500 Index fell only 0.2% for the month, but it did mark the end to a 4-month win streak. Should bulls worry about what a down January might mean for the rest of 2020? There’s an old adage on Wall Street that suggests, “As goes January, so goes the year.” This was first discussed in 1972 by Yale Hirsh of the Stock Trader’s Almanac, and it has an impressive track record. Simply put, when the first month of the year was green, it bodes well for the rest of the year (and vice versa). Given stocks closed red in January, how worried should investors be? As shown below in the LPL Chart of the Day, the numbers confirm that when the S&P 500 has been green in January, the index has been up 11.9% on average over the rest of the year (final 11 months) and higher 86% of the time. However, when that first month was red, stocks rose only 1.2% on average over the final 11 months and were higher less than 60% of the time. Another way to look at this data shows the average full year return based on if stocks are higher in January or not. As you can clearly see, stocks have tended to have trouble gaining any traction over the rest of the year after a January loss, while a green January has been quite strong. It isn’t all bad news though. Remember the S&P 500 was down only 0.2% in January, so one could argue that it was really flat. “Yes, a lower January is a potential worry for the bulls,” explained LPL Financial Senior Market Strategist Ryan Detrick. “But it is worth noting the previous 5 times (and 7 of 8) when stocks were lower in January, those final 11 months rallied. So this might not be the clear cut bearish signal so many think it is.”
JOLTS Jolted Tue, Feb 11, 2020 The December Job Openings and Labor Turnover Survey (JOLTS) from the BLS showed a sharp drop in the number of available jobs in the US economy. While economists were expecting total job openings of 6.925 million, the actual level of available jobs was just 6.423 million. That's an enormous miss! Since economist forecasts for this report are available (~2012), the latest report was the biggest shortfall relative to expectations in the history of the survey. Not only that but December's miss followed November's report which was also much weaker than expected (6.80 mln vs 7.25 mln forecast), ranking as the third worst report relative to expectations in the history of the survey. With back to back weak reports, the JOLTS has now seen its largest two-month decline on record (since 2001), and it's not even close. Behind the current two-month decline of over 900K available jobs, the next largest was in September 2015 when the two-month decline was 697K. While there was no recession in 2015, there was major weakness in the Energy sector. Furthermore, the only three other times the JOLTS fell more than 500K in a two-month span all occurred during recessions. The most notable aspect of the weakness in the JOLTS report over the last two months, though, is how disconnected it is from just about every other employment-related report we have seen recently. While there's been a collapse in the number of available jobs in the US economy, we would note that there are still more available jobs than there are people looking for them. The chart below compares the monthly number of job openings to the number of US Americans who are unemployed and looking for work. Prior to 2018, there was never a time in the history of the JOLTS report when there were more job openings than there were unemployed Americans. That changed in January 2018 and has been the same ever since. While the spread has narrowed substantially from more than 1.5 million two months ago, there's still a historic amount of tightness in the labor market even if the number of job openings has suddenly started to shrink.
Trading After Presidents’ Day Weekend Still Weak Yesterday’s post, showed improvement the two days before Presidents’ Day Weekend the past 10 years. But the two days after still display a lot of red. Since 1990 Tuesday after Presidents’ Day has been strongest for the S&P 500 with 18 gains and 12 losses for median gain of 0.14% and an average loss of –0.22%. DJIA also has more gains than losses on the Tuesday after, but NASDAQ is net loser down 18 of 30 years with and average loss of –0.50% and a median loss of –0.21%. Wednesday is all red for all three major averages. NASDAQ and S&P 500 have more losses, but DJIA has greater magnitude of decline. On the Wednesday after the Presidents’ Day holiday DJIA is down 16 of 30 with an average loss of –0.08% and a median decline of –0.16%. S&P 500 is down 18 of 30, average –0.04%, median –0.11% and NASDAQ is down 17 of 30, average –0.04%, median –0.14%.
Week of Presidents’ Day Bearish for Small Caps Russell 2000 Down 16 of Last 30 Page 100 of the Stock Trader’s Almanac 2020 points out Presidents’ Day as the poorest performing holiday of the eight holidays that are tracked. Unlike the others, the trading day before and the trading day after this three-day holiday weekend are both down on average over the past 40 years. Since 1990 the 4-day shortened week of Presidents’ Day is no great shakes either. Small caps have a negative record with Russell 2000 down 16 of the last 30 years with an average loss of -0.23% and a median loss of -0.14%. DJIA and NASDAQ have advanced 17 times with average weekly losses of -0.26% and -0.34% but with median gains of 0.27% and 0.17% respectively. S&P 500 is up 15 times and down 15 times over the 30-year period with an average loss of -0.22% and a median gain of 0.02%.
Election Year March: Performance Haunted By Steep 1980 Declines Boisterous March markets tend to drive prices up early in the month and batter stocks at month end. Julius Caesar failed to heed the famous warning to “beware the Ides of March” but investors have been served well when they have. Stock prices have a propensity to decline, sometimes rather precipitously, during the latter days of the month. In March 2001, DJIA plunged 1469 points (-11.8%) from March 9 to the 22. Normally a decent performing market month, March is somewhat above average in election years with advances 64.7% of the time with a 1.0% average DJIA gain since 1952. S&P 500 has also advanced 64.7% of the time since 1952, but gains have been slightly better at 1.2%, on average. NASDAQ has not fared well in March in election years since 1972. Due to a 17.1% loss in 1980, March is NASDAQ’s second worst month of the election year. Similarly, March 1980’s steep losses adversely affect Russell 1000 and Russell 2000 indices.
Dividend and Treasury Yield Spreads At Multiyear Highs Mon, Feb 24, 2020 Risk assets are selling off in dramatic fashion today as the major indices are all down well over 3%. These declines have led the dividend yield on the S&P 500 to jump over 5 bps since Friday. Now at 1.94%, the S&P 500's dividend yield is at its highest level since late October 2019. Meanwhile, Treasury yields are cratering with the 10-Year down over 10 bps. That is the largest one-day decline in the 10-Year yield since August 14th of last year when it fell 12.43 bps. That brings the yield down to 1.37%, which is the lowest level since July 2016. Going further out on the curve, the yield on the 30-Year Treasury bond is now at a record low of 1.82%. Similar to the 10 Year, that is nearly a 10 basis point decline from Friday. Given these moves, holding constant the difference in risks associated with the two assets, the spread between the S&P 500's dividend yield is higher than the 10-Year yield by its widest margin since September of 2016 at 0.575, eclipsing the previous high from last August. Prior to 2016, the spread was higher throughout much of 2012. The spread between the S&P 500's dividend yield and the 30-Year Treasury, on the other hand, is at its highest level in over a decade. The spread now stands at 0.119 which is the widest the spread has been since January 2009, and is favoring stocks (positive spread) for the first time since September. Unlike the spread between the S&P 500's dividend yield and the 10-Year yield which has flipped back and forth between favoring stocks and Treasuries over the past decade, the 30-Year yield has much more consistently favored bonds. In fact, outside of today and briefly last September, the only other time we've seen a positive spread was in 2016.
Fears of COVID-19 Pandemic, Dow Plummets 1000 Points 3rd Time in History Fears of a potential pandemic from the novel coronavirus (COVID-19) sent stocks plummeting today, pushing the Dow down 1000 points for the third time in history. But the S&P 500 did not close lower than the January 31 close when the market fell 600 Dow points on early COVID-19 fears. However, the risk of global pandemic may be diminishing as the rate of increase in new cases appears to be plateauing and the number of individuals still infected has been declining for the past several days. The number of individuals recovered from COVID-19 continues to increase. As you can see in the table here of the 79,553 confirmed cases, 2628 people have died and 25,215 have recovered. That equates to a death rate of 3.3% vs. a 31.7% recovery rate. The market is clearly, and understandably, concerned that the spread of COVID-19 to more countries and the quarantines, especially in China, are going to have an impact on global supply chains, economic activity and financial markets. However, history has shown that these outbreaks have had little impact on the market. We first addressed this on January 29. I have updated that historical table here and below that is a new table showing the chronology of Coronavirus COVID-19 Global Cases by Johns Hopkins CSSE. I have also provided two graphs that illustrate what appears to be a slowdown in new global cases, an increase in the recovery rate and the decrease in the number of individuals still infected. While we all should remain vigilant on the health issues, this is not a time for market or portfolio panic.
Bad Case of Deja Vu – Another 3% S&P 500 Decline Aside from a modest amount of strength on the open, the market finished just about as poorly as it did yesterday. From S&P 500’s all-time closing high on February 19, it is now down 7.62% in just four trading sessions with greater than 3% daily losses on back-to-back days. Since 1930, S&P 500 has only experienced back-to-back (or three in a row) 3% of greater daily losses 28 times. The last time this occurred was in August of 2015. Of the 28 past occurrences, 18 took place prior to the end of WWII. The market’s response to the surprise attack on Pearl Harbor on December 7, 1941 was back-to-back daily losses exceeding 3% on each day. Plotting the 30 trading days before and 60 trading days after two or more daily losses of 3% or more in the following chart highlights past occurrences tended to come near the end of a longer losing streak and on average S&P 500 has jumped back around 3-4.5% in the five trading days afterward. Comparing pre- and post-WWII periods the pattern of declines and recovery are not that dissimilar. Looking further out beyond the above chart, S&P 500 was higher 1-year after all post-WWII occurrences, including all that took place during the financial crisis of 2007-2009. Returns 3- and 6-months after are somewhat mixed and uninspiring. The sooner the spread of the coronavirus is under control or even better, a vaccine is available, then the quicker the market will likely find support and begin to recover.
