Did stocks bottom in mid-June?

Ever since stocks bottomed in mid-June, strategists have been asking: was that a bottom, or was it the bottom? The extent of the rally – over the last two months, the S&P 500 has regained more than half of its bear market losses – increasingly suggests the latter scenario is more likely.

Data from CFRA strategist Sam Stovall shows that since 1946, there have been 19 occasions when stocks retraced more than half their losses following a large market decline (defined as a fall of at least 15 per cent). Stovall found only one instance where stocks subsequently endured another sell-off that exceeded the prior low.

That one exception was during the brutal 1973-74 bear market, when bulls’ hopes were dashed by the breakout of the Arab-Israeli war and the subsequent oil embargo.

Of course, this doesn’t mean investors won’t endure further nerve-racking moments in coming months. Stocks may fall again and mid-June’s lows might well be challenged. However, if history is a guide, those lows will hold. To answer the original question, June 16th′s low wasn’t just a bottom; it’s likely to prove the bottom.