How Have Markets and Economy Evolved Since the Last Leap Year?

Review the latest Weekly Headings by CIO Larry Adam.

Key Takeaways

  • Stocks have continued to leap higher
  • Bonds still have not recovered from their losses
  • Economic growth has not skipped a beat

We’re having another leap year! This year, February will include another day – the 'bonus' day that we get about once every four years. While this practice may seem arbitrary, there is actually science behind it. Since the earth takes 365.25 days to rotate around the sun and our calendars round down to 365 days in a year, a fractional surplus of time remains unaccounted for each year. The ‘bonus’ day is needed to ensure that our seasons don’t fall out of alignment. The last leap year occurred in 2020, just around the time the global economy was beginning to be impacted by the COVID-19 pandemic. The world has changed, and the economy and the financial markets have experienced a rollercoaster the last four years, so we thought it would be instructive to take a look at how things have evolved over that time period:

  • Stocks have leaped higher | Four years ago this week (2/19 to be exact) the S&P 500 climbed to an all-time high of 3,386 before plunging over -34% as the world economy shutdown due to the pandemic. Ironically, despite the pullback, with the S&P 500 today trading at 5,087, the four-year average annual return of the S&P 500 is 12.5%, once again suggesting that investors willing to endure volatility can be rewarded with long-term performance. Some of the performance statistics over that time period include:
      • Since bottoming at 2,237 in March 2020, the S&P 500 has gone on to achieve 108 new all-time highs – with the bulk of the records occurring in 2021 as the economy and earnings recovered, powered by massive monetary and fiscal stimulus.
      • Over the last four years, the S&P 500 sectors that have led the rally include the Technology and Energy sectors, which are cumulatively up 115.4% and 90.1% (or 21.1% and 17.4% annualized), respectively.