Stock-market’s tech-led surge off the pandemic low is ‘not unusual’ — but


A normal bounce.


Michal Cizek/Agence France-Presse/Getty Images

There is something odd about the stock market’s breakneck surge off its March 23 pandemic low to new all-time highs, but it isn’t what most investors think.

“The pace of the market’s recovery is not at all unusual. What makes this cycle different is the leadership of high quality growth stocks,” said Jonathan Golub, chief U.S. equity strategist at Credit Suisse, in a Thursday note.

The chart below tracks the market’s rebound from a fall that saw the S&P 500
SPX,
+0.29%

plunge roughly 34% from a record high in late February to its March low versus the bounceback from the 2009 market bottom and the large-cap index’s 2002 nadir.


Credit Suisse

Stocks have set back in September, with the S&P 500 briefly flirting with correction territory — a pullback of 10% from a recent peak — before trading on either side of unchanged in a choppy Thursday session. The S&P 500, however, remains up more than 40% from its March low.

Golub noted that the market’s plunge relative to the near-term economic carnage caused by the pandemic was relatively shallow compared with previous tumbles — likely a “result of the government’s unusually fast/aggressive policy action—both fiscal and monetary.” The S&P 500’s peak-to-trough fall of 33.9% compares with a drop of 56.8% in 2007-09 and 49.1% in 2002-03.

Golub set about refuting some misnomers about the market rally. For one, he noted, post-bottom returns for the equal-weight S&P 500 of 49.1% and the cap-weighted S&P 500 of 48.2% are roughly in line.

Leadership by tech and tech-related companies, dubbed TECH+, aren’t out of keeping with the previous bouncebacks, he noted. TECH+ is up 58.3% in the 131 days since the market bottom, compared with a 61.5% rise over the same stretch in 2009 and a 24% rise in 2002-03.

Things get strange when it comes to the way growth stocks have outpaced value, however, as illustrated by the chart below:


Credit Suisse

Overall, it sits well with Golub.

“We believe the market’s advance and the leadership experienced throughout the recovery is likely to persist,” he wrote.





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