The index has gained more than 70% in the past 12 months
It’s been about a year since the S&P 500 Index (SPX) hit its lowest point in Covid-19’s stock market crash, and stocks have rallied sharply since then. For the fourth time since 1929, the index has increased by over 70% compared to the previous year. The other three events occurred during the Great Depression (1933, 1934 and 1936). After the financial crisis, the current recovery in the stock markets seems to be that of the 2009 low. The S&P 500 never hit 70% year-over-year during this rebound, but it was tight. The table below shows this recovery alongside the current one. And as it stands, it’s about the time the recovery stalled a bit before moving up any further.
This week is a mess as I look at what usually happens after big year-long rallies. Then I look at how analysts treated a soaring sector and show the S&P 500’s best and worst stocks during its recent rebound.
Big annual S&P 500 rallies
The first thing I wanted to find out was if big rallies like this stalled after a year. The S&P 500 Index gained 50% six times over the year. The table below summarizes the returns after these events. For comparison, the second table shows typical index returns since 1933 (the year in which they first appeared). Because of these earlier events, the rally is in no danger of stopping anytime soon. It’s only six data points, but the returns after large one-year gains are better than typical returns.
Below are the individual signals for the S&P 500, which have increased by 50% compared to the previous year. After the initial recovery from the financial crisis, it was a little difficult. The index fell nearly 5% six months after the signal. However, a full year later, investors saw an increase of nearly 20%. The index fell just once a year later on one of these signals.
Analysts targeting the best performing sector
If you split roughly 1,200 liquid option stocks across 35 sectors, below are the six sectors that analysts were most bearish in over the past year. Alternative energy is first on the list and the most interesting. At the low of Covid-19 a year ago, 65% of analysts had buy recommendations for the 11 stocks in the sector. That number fell to 55%, although these stocks rose an average of 470% over the past year. Therefore, the buy recommendations for the sector with the best performance were the strongest.
The following table shows the individual stocks in the alternative energy sector. A great pair are Solaredge Technologies (SEDG) and First Solar (FSLR). For SEDG it was up 315% year over year, but the percentage of analysts who rated it as a “Buy” declined from 78% to 47%. At the bottom of the table, the FSLR has risen 143% over the past 12 months and has seen buy recommendations drop from 60% to 31%.
Best and worst stocks year over year
Finally, I’ve listed the top and bottom 20 stocks in the S&P 500 based on their returns over the past 12 months. The first table shows the stocks with the best performance. Many states aren’t fully open yet, but betting on casino stocks and retailers a year ago would have paid off.
Now for the stocks that lagged the most during the stock rally. There’s an obvious topic here – many drug companies have been asked to speculate about coronavirus treatments. Most didn’t turn out as investors hoped, and a year later are on the list of worst performers. However, this list shows how strong the market has been over the past year. Of the 500 stocks in the index, only two have declined year over year.