A Look at SPX Performance 1 Year After the Covid-19 Bottom

Plus, a list of the best and worst stocks year-over-year

Senior Quantitative Analyst
Mar 24, 2021 at 8:00 AM
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It has been roughly one year since the S&P 500 Index (SPX) hit its lowest point in the Covid-19 stock market crash, and stocks have recovered greatly since then. For only the fourth time since 1929, the index has gained over 70% year-over-year. The other three times occurred during the Great Depression (1933, 1934 and 1936). The current stock market recovery looks like the one off the 2009 low, after the financial crisis. The S&P 500 never hit 70% year-over-year during that recovery, but it was close. The chart below looks at that recovery side-by-side with the current one. And from the look of it, it is about the time recovery stalled for a bit, before continuing higher.

This week is a hodge-podge, as I look at what usually happens after huge one-year rallies. Then, I look at how analysts have treated one high-flying sector, and show the best and worst stocks in the S&P 500 during its latest recovery.

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Big S&P 500 One-Year Rallies

The first thing I wanted to find out was whether huge rallies like this tend to peter out after a year. There have been six times that the S&P 500 Index gained 50% on a year-over-year basis. The table below summarizes the returns after these occurrences. The second table shows typical index returns since 1933 (the year of the first occurrence), for comparison. Based on these previous happenings, the rally isn’t in danger of stopping soon. It’s only six data points, but the returns after big one-year gains are better than typical returns.

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Below are the individual signals for the S&P 500 gaining 50% year-over-year. Things were a bit rocky after the initial recovery from the financial crisis. The index was down almost 5% six months after the signal. A full year later, however, investors had a gain of almost 20%. The index was down a year later only one time after one of these signals.

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Analysts Souring on the Best Performing Sector 

If you separate about 1,200 liquid optionable stocks into 35 sectors, below are the six sectors in which analysts were most bearish over the past year.  Alternative energy is the first one in the list, and the most interesting. At the Covid-19 bottom a year ago, 65% of analysts had "buy" ratings on the 11 stocks in that sector. That number fell to 55%, despite those stocks gaining an average of 470% over the past year. Therefore, "buy" recommendations fell the most for the best performing sector.

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The next table shows the individual stocks making up the alternative energy sector. A couple that stand out are Solaredge Technologies (SEDG) and First Solar (FSLR). For SEDG, it gained 315% year-over-year, but the percentage of analysts ranking it a "buy" fell from 78% to 47%. At the bottom of the table, FSLR gained 143% over the past 12 months, and saw the amount "buy" ratings fall from 60% to 31%.

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Best and Worst Stocks Year-Over-Year

Finally, I listed the best and worst 20 stocks in the S&P 500 by their return over the past 12 months. The first table shows the best performing stocks. Many states still aren’t fully opened up, but betting on casino stocks and retailers a year ago would have paid off.

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Now, onto the stocks that have lagged the most during the stock rally. There’s an obvious theme here -- many  pharmaceutical companies got bid up on speculation about coronavirus treatments. Most didn’t pan out the way investors had hoped, so a year later they are on the list of worst performers. This list, however, reveals just how strong the market has been over the past year. Of the 500 stock in the index, only two are down year-over-over.

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