Coronavirus: One Year On

March 8, 2021

As we roll from February into March, we have officially marked one year since the market suffered a flash crash due to the panic associated with the onset of COVID-19. The market saw a precipitous decline, which was followed by a recovery that was nearly as rapid and led to 2020 finishing positive for the year despite being down by more than 30% at one point.

Shifting gears back to February 2021, the market has started the year on a positive note but has seen a retracement as of late. The fundamentals of the market overall continue to look strong, and it is natural for pullbacks to occur after large run-ups in the market such as we have seen for the past few months. An important thing to remember is that the current bull market is less than one year old and is displaying behaviors typical of a relatively young bull market.

Click on Chart to make Larger: The chart above chronicles two previous bull markets in their infant stages and the subsequent behaviors which they exhibited. The chart depicts the performance throughout the term of each of the markets. Each of the previous two instances saw a retracement at around the one-year mark and stayed in a holding pattern for roughly six months before continuing to rise.

The main takeaway from the analysis of these two historical market conditions is that the activity we are now seeing in the market is both normal and healthy. Earnings have been healthy and provide a justification and base of support for the price level of the current market. It is important to remain invested and remember the age-old adage, “Time-in, not timing” the market. If you have any questions, talk to your financial advisor about what is the best course of action for you to take.