The U.S. stock market took an unusual swing after Thursday’s inflation report.
“Shortly after the open, the S&P 500 index had dropped nearly 4% from its pre-market highs before staging an epic rally of over 5%,” Bespoke Investment Group said in a note Friday. “Even in this ‘all or nothing’ type of market environment, reversals of that magnitude are rare.”“Shortly after the open, the S&P 500 index had dropped nearly 4% from its pre-market highs before staging an epic rally of over 5%,” Bespoke Investment Group said in a note Friday.
“There were only nine other days since 1983 when the S&P 500 fell more than 2% intraday but finished the day up over 2%,” said Bespoke. “The most recent occurrence was over eleven years ago on 10/4/11 and before that, there were five separate occurrences in 2008 alone!”“We’re not sure when or where the ultimate bottom in stocks will end up, but violent moves like yesterday tend to occur closer to lows than highs,” said Bespoke.
“One year later, though, performance was much more consistent with an average gain of 14.6% and positive returns eight out of nine times,” Bespoke wrote. “People usually forget that long-term rallies emerge out of chaos where investors become increasingly convinced that the only viable path if any exists at all, is lower.”
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