Why the stock market is headed for a swift recovery

Why the stock market is headed for a swift recovery

Welcome to the last in my series of columns on the year ahead. In my four earlier ones, I covered why December was lousy and why stocks are on the right side of a swift V-shaped recovery. U.S. stocks have climbed more than 10 percent since the market close on Christmas Eve. Accompanied by wild wiggles, the rest of 2019 should be similarly happy.

On December 17, I explained how stocks’ have averaged 34 percent before dividends in the 12 months after all of history’s correction bottoms (meaning a drop of 10 to 19.99 percent in the Standard & Poor’s 500 index).

Assuming December 24 remains the bottom, this correction ended later in a calendar year than any correction or bear market ever. An average aftermath now would make 2019 simply stellar, and surprise almost everyone. That’s bullish.

Maybe December 24 wasn’t the bottom. We can’t know for sure. But there were abundant bottomish signals. Mutual fund outflows reached levels only associated with major market bottoms. December outflows matched March, 2009, when the last bear market ended. U.S. stock market liquidity sank like a brick, also echoing prior lows.

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