(BFM Bourse) – The past month has been difficult for most markets, including Wall Street where the S&P 500 lost 8.8% (the worst performance for the month of April since 1970). And as the first quarter was already not famous, it is the worst start to the year over the first four months displayed by the Wall Street benchmark index.
Unheard of for the S&P 500 index. Over the period from January to April, the benchmark index of the American stock market lost 13.3%, the largest drop ever recorded during a first quarter since its creation by Lew Schellbach and George Olsen, in 1957.
For the sake of extending the statistical baseline, it is possible to start the data sample at 1928 based on the variations of the ancestor of the S&P 500, the S&P 90, as done by LPL Research, the well-known study center of the American broker LPL Financial. We salute in passing the meticulousness of MM. Olsen and Schellbach, who took care to collect and make available in a definitive document the data of the predecessor index in order to facilitate historical comparisons in the future.
By this yardstick, the first four months of 2022 correspond to the third largest drop for this term in almost a century, since only the first term of 1932 (aftermath of the crash of 29 and the Great Depression) and 1939 (start of the Second World War in Europe) had experienced worse, respectively -28.2% and -16.8%.
The worst is over?
As an indication, the last double-digit drop dates back to the first quarter of 1970 (-11.4%), while the performance in 2020 had only been -9.9% over this period despite the spring crash linked to the coronavirus pandemic.
But after such a calamitous start to the year, what next? Ryan Detrick, head of market analysts at LPL, obviously looked into the matter. “The good news (and we really need it) and that by looking at the ten worst starts to the year, the rest of the year ends much better than average”, indicates the specialist.
Indeed, over the entire period 1928-2021, the performance of the S&P 500 (the S&P 90 for the first three decades) from the end of April to the end of the year is +4.8% on average. This is the average gain observed over the last eight months of a year (+6% in median).
However, when the first quarter was bad, the performance for the rest of the year tends to be better than the historical average: +10% on average and even +12.9% on the median, with a negative variation only in a third of cases.
But “predictions are difficult, especially when they concern the future”, as Ryan Detrick humorously points out. In other words, past performance never guarantees future results.
Guillaume Bayre – ©2022 BFM Bourse