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

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.

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:

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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