Stock Gains? What Gains?

By David Berman

If the recent 7.4% decline by the S&P 500 – along with similar declines by virtually every index in the world since January – isn’t putting sweat on your brow, Bespoke Investment Group has a more alarming way to size up the dip: 35% of the S&P 500’s gains since the start of 2009 have been erased in fewer than 14 trading days.

That is, the index gained 247 points from the start of 2009 until its peak on Jan. 19. Since then, the index has fallen 86 points.

That certainly is a sobering observation. However, I think it is worth pointing out that 2009 included two months of setbacks at the start of the year – which sent the S&P 500 down 25% – before the index finally embarked upon a 10 month bull-market bonanza.

If you look at the index’s performance since hitting a 12-year low on March 9, then it actually rose 474 points to its peak in January. Using that number, the recent decline represents an 18% clawback – perhaps painful and unsettling, but far less severe.

Let’s take a look at the Canadian numbers. The S&P/TSX composite index has fallen 6.7%, or 797 points, from its recent peak on Jan. 8. Using Bespoke’s approach, that means the index has handed back over the past month 27% of its gains since the start of 2009.

But using the index’s gains since its trough in March, the recent setback amounts to a far-less disturbing 18% hand-back.