The U.S. stock market, as measured by S&P 500, recently returned to all-time highs. It's still August – and so far this year we’ve seen the quickest bear market in stocks in history, and now, the quickest recovery. All of this amidst an ongoing global pandemic.

I keep asking myself, “Is the market moving faster?” and it definitely seems that way – but does the evidence back it up? First, I looked at the current loss and subsequent recovery, compared to all S&P 500 declines since 1950 (less than -5%). 

As you can see in the chart, 2020 sticks out like a sore thumb. Similar size declines (in 1987 and 1968) took more than 400 days to return to an all-time high. Remember that blip back in June, a one day drop of 6%? Stocks rebounded in a couple of weeks, about half the time it normally takes for corrections to recover. So far, it seems like speed is a defining feature of this market.

Source: Bloomberg

Looking through the history of declines going back to 1950, we can make some comparisons. I looked at declines pre-and post-Great Financial Crisis of 2008-2009 (“GFC”). Results are in the table below, and they aren’t quite what I expected. There is some evidence that more shallow corrections (10% or less) have happened and recovered faster in recent times than prior to the GFC. However, there are only five examples of declines between -5% and -10% since the GFC, not quite statistically significant. Larger declines, -10% to -15%, have actually taken longer to recover than they did pre-GFC. But again, there are only two instances of this happening (2016 and 2018).

 

Source: Bloomberg

All in, each decline is different – in circumstance, length, and depth. More needs to be done to definitively say that markets are faster than ever. Heck, in 1955 stocks fell 11% and recovered in one month, and in 1982 fell 27% and recovered in two! The point is, markets move fast, and maybe they always have. Trying to judge the best time to get in or out is always a messy proposition. Despite all of the issues and reasons the market could crash, it does always recover. Buying at all-time highs is as good a time as ever.

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