The current trading environment of the S&P 500 suggests a beacon of hope for investors, poised just beneath its historical highs. This resurgence marks a sharp contrast to the tumultuous days of the past, particularly during the onset of the COVID-19 pandemic four years ago.
Recalling the 2020 Turmoil: Following a prolonged upward trajectory since hitting its lows in March 2009, the U.S. equity market spiraled downward abruptly in early 2020 amid the pandemic outbreak.
The global financial landscape took a sharp downturn in late February 2020, with the selling frenzy escalating in subsequent weeks. March 16, 2020, marked a dark day for the S&P 500 as it hit a multi-year low of 2,386.13, witnessing a staggering 12% plunge – the most severe dip during the pandemic-induced downturn. Termed “Black Monday II,” this day followed closely on the heels of the prior Monday, dubbed “Black Monday I,” during which the broader index had plummeted by around 8%.
On that pivotal day in March, stocks across all sectors witnessed a massive sell-off, with even tech giant Apple, then the frontrunner in market capitalization, shedding over 12% within a single trading session.
The Path to Recovery: In the wake of the crisis, a synchronized effort by global central banks and governments was initiated to counter the market downturn, with the U.S. market, in particular, witnessing a notable reversal. Bolstered by stimulus packages, the S&P 500 embarked on an upward trajectory, heralding the dawn of economic resurgence.
The bullish momentum persisted throughout 2021, however, the tide turned in 2022 as inflationary pressures mounted due to the implemented stimulus measures. The Federal Reserve was compelled to undertake the daunting task of raising the Fed funds rate. Swift and aggressive rate hikes from the central bank rattled consumer sentiments, leading to stringent credit conditions that weighed heavily on businesses.
The market landscape saw a glimmer of hope emerge in 2023, with the resilient economy adapting to the higher-rate environment. Since then, there has been an unwavering march forward.
Insights from SPY Returns: The SPDR S&P 500 ETF Trust SPY, mirroring the S&P 500 Index’s performance, concluded at $224.53 on March 16. Hypothetically, a $1,000 investment in SPY at its depressed 2020 price point would have yielded 4.5 units of the ETF. Presently, these units would be valued at $2,271, reflecting a commendable 127% return over a four-year timeline.
At the conclusion of Friday’s trading session, SPY recorded a 0.69% dip, settling at $509.83, based on Benzinga Pro data.
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