market correction? there are a lot of pieces in play

Update: 1/25/21

In News by admin

A tale of two recoveries, revisited

Back in mid-December, we presented a chart of QQQ (the exchange traded fund that tracks the Nasdaq 100 index) and showed how it was closely tracking its own price action from 2009. It seems like a good time for an update, with a little twist. You can see that the QQQ continues to track its 2009 action pretty well. It has started to pull away from its previous action a bit since we last wrote about it, but a few days of selloff like today and it will be right back in line.

But here’s the twist. The chart below is of the S&P 500 index. The light blue line shows the S&P’s price action in 2009 and 2010. The dark blue line shows the S&P during 2020.  Dates were normalized so that the lowest point of each correction are at the same points on the chart.

The current S&P continues to track 2009 very well.

As before, a fair amount of skepticism is warranted when trying to draw conclusions about an event that only has one historical precedent but, the degree to which the S&P’s recovery from the 2020 correction is tracking its recovery from the 2008/2009 correction is uncanny.

At this point in 2009, the recovery basically stalled. There were some big moves both up and down, but little overall progress was made over the ensuing five months. Again, past performance is not an indicator of future results.  However, if there is a chance that we’re headed for an extended period of volatility with not much to show for it, now may be a good time to consider your overall strategy for the next cycle and beyond.  There are certainly a lot of moving pieces in play.


Jim, Mark, and Dave

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