No Quarter (For Consistency)

There is no shortage of headwinds facing both the market and the economy: the tragic Russian invasion of Ukraine and attendant commodity/energy crisis; the Federal Reserve's transition from accommodative to tighter monetary policy; and increased chatter of a recession on the horizon; among others. Yet, over the past month, stocks have rallied sharply, coming close to erasing their year-to-date losses.

Whether this proves to be a rally in the midst of a bear market, or the end of a corrective phase and start of a leg higher, remains to be seen. Regardless, attempting to guess the short-term moves of the market is always treacherous; so, let's stick with what we know and assess the health of the rally.

Taking stock

From their own respective troughs, the major indexes have experienced sharp gains:

  • S&P 500 (since its trough on March 8th) has gained 9%
  • NASDAQ (since its trough on March 14th) has gained 13%
  • Russell 2000 (since its trough on January 27th) has gained 8%.

Those moves are impressive when considering—on a year-to-date basis—all three indexes have undergone a traditional correction (a decline of at least 10%), and the NASDAQ and Russell 2000 did experience traditional bear markets (a decline of at least 20% from a high), as shown in the table below. Individual member performance within those benchmarks has been worse, with the average member's maximum drawdown from year-to-date highs ranging from -19% to -29%, and from 52-week highs ranging from -25% to -46%.

Source: Charles Schwab, Bloomberg, as of 4/1/2022. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Past performance is no guarantee of future results. Some members excluded from year-to-date return columns given additions to indices were after January 2022.