Happy Birthday, Bear Market Rally!

Citigroup's chief U.S. equities strategist Tobias Levkovich said the 94 percent gain in the S&P 500 in the past two years is the sixth best bear market bounce ever, and there's still a ways to go.


In the two years since March 9, 2009, when the S&P closed at 676, small caps have outperformed large U.S. stocks and also emerging markets.

The Russell 2000, for instance, was up 136.6 percent, as was the S&P 600 small cap index. The Nasdaq rose 116 percent.

The rally is technically a bear market rally, since the market has not reached the old high of S&P 1565 hit in October, 2007.

Levkovich said he believes earnings, as the most important driver, are still supportive of stock market gains in 2011. But he notes in a report today that some investors have clearly missed the rally, if the inflows into mutual funds are an indication. The rush into bond funds and out of equity funds has not necessarily been good for investors.

Depression Was Among Best Time for Bounces

When looking at other big bounces, the best such rally was the April 1942 to May 1946 gain of 157.7 percent. But most of the other big moves were Great Depression rallies in the 1930s.

There was the 131.7 percent move from March 1935 to March 1937, followed by the third-best rally of 120.7 percent from February 1933 to July 1933. The fourth was a 111 percent gain from June 1932 to September 1932.

The fifth best is the exception as it came in this century, starting in October 2002 and ending with a 101.5 percent gain by October 2007, when stocks hit their all-time high.

As far as stock sectors go, the best performers in the past two years were autos and components, up 429 percent, followed by REITS, up 188 percent. Banks saw a 165 percent gain, and financials, as a broader group, were up 165.2 percent.

The worst performing stocks were in the food and staples retailing sector, or supermarkets, up only 34.8 percent. Pharmaceuticals and biotech were also laggards, up just 36.6 percent, followed by telecom, up 41.2 and utilities, up 42 percent.

Asset Class Returns Since 3/9/09Copper up 174 percent

Silver up 168 percent

MSCI emerging markets up 134.6 percent

CRB commodity index up 122.3 percent

WTI crude up 121 percent

S&P GSCI agricultural commodities index 104 percent

MSCI Europe up 95.7 percent

CRB Index: livestock and products up 95 percent

CRB index: raw materials up 88.5 percent

S&P GSCI Agriculture and live stock up 86.4 percent

London gold bullion up 54.5 percent

S&P GSCI Livestock 36.9 percent

10-year Treasury Note Constant maturity total return 1 percent

3-month Treasury Bill secondary market total return 0.3 percent

NAR Median sales price: existing single family home down 6 percent

Nominal broad trade-weighted exchange value of U.S. dollar down 15.1 percent

Nominal trade-weighted exchange value of dollar vs. major currencies down 17.2 percent

(this list was courtesy of Citigroup)

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