Good News and Bad News for Bottom Fishers in the U.S. Stock Market
The S&P 500 index in the US has risen for six consecutive days, essentially recovering from the decline since April 2. Historical data shows that since 1970, the S&P 500 index has turned upward after experiencing the 10 largest monthly pullbacks. The good news is that after these 10 major declines, 9 of them continued to rise in the following 1 month, 3 months, 6 months, and 12 months. The bad news is that the only exception occurred in December 1973, when the US experienced stagflation, and the current tariff shocks are seen as a similar economic challenge
Overnight, the S&P 500 rose for six consecutive days, essentially recovering the losses since April 2, and it is expected to rise throughout April even after a significant drop.
There is indeed a precedent for this in the U.S. stock market. The chart lists the 10 largest monthly drawdowns of the S&P index since 1970.
For investors looking to buy the dip in U.S. stocks, here is some good news and some bad news:
The good news is: all 10 of these major drops turned into gains within the same month, and 9 of them saw increases in the following 1 month, 3 months, 6 months, and 12 months;
The bad news is: the only exception was in December 1973, during which the U.S. experienced stagflation following the "Nixon Shock." Many researchers today compare Trump's tariff impacts to the "Nixon Shock" of that time.
