Bad News Positive Returns

Last year, I wrote a piece that illustrated positive stock market returns happening a stretch of horrific news. Last week, we experienced it firsthand.

After selling off more than 35% from its all-time highs, the S&P 500 jumped more than 20% over three days. During the third trading day, we received news that nearly 3.3 million Americans filed for unemployment the previous week and the U.S. surpassed China as being the most infected country in the world with the Coronavirus. The unemployment graphic on page one of Friday's New York Times was jarring. 

The news continued to deteriorate all week, yet the market bounced 20%. Herein lies the problem of not staying invested. The market is messy. Returns are non-linear. And they can come at times when it doesn't seem practical.

Disclosure: this in no way signals that a bottom is in. In fact, Mike Batnick wrote a great post last month showing how we can get several of these rallies within a broader bear market. Don't fall for these potential head fakes that the 'worst is over.' If we happen to get one of these 'V-shaped' recoveries, great. But let that not be your baseline expectation.

If you're investing based on narratives and news, I would suggest to find another approach. Last week is just the latest example why.

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^Source:

^{Bear Market Rallies (Irrelevant Investor)}