February 20, 2025

Written by: Ryan Kelly, CFA®
Chief Investment Officer, Legato Financial Group

Reflecting on the Market Five Years After COVID

February 19th marked a significant anniversary in the financial world—yet few seem to be discussing it. This date represents five years since the stock market peaked before the COVID-19 crisis triggered a 34% decline in the S&P 500.

A Google search led me to the “CDC Museum COVID-19 Timeline” webpage, a fascinating yet sobering resource that details how rapidly events unfolded.

Consider just a few milestones from that timeline:

• January 13, 2020: The first lab-confirmed case of COVID-19 outside China is reported in Thailand.
• February 10, 2020: Global deaths surpass 1,000.
• February 11, 2020: The WHO officially names the disease “COVID-19.”
• February 23, 2020: Italy imposes a nationwide lockdown.
• February 25, 2020: The CDC warns Americans that “disruptions to everyday life may be severe.”
• March 27, 2020: President Trump signs the CARES Act.
• April 3, 2020: The CDC recommends wearing masks in public.

The Market Before the Pandemic

The year leading up to COVID-19 was strong for the markets. Between February 19, 2019, and February 19, 2020, the S&P 500 gained 24.2%. Small-cap stocks (Russell 2000) rose over 9%, while international equities (MSCI ACWI ex-US Index) climbed more than 12%. Even bonds, as measured by the Bloomberg U.S. Aggregate Index, returned over 9.5%.

What’s even more remarkable is how well the S&P performed in early February 2020. From January 31 to February 19, as concerns about COVID-19 circulated, the index still rose over 5%.

The Market Sell-Off

I vividly remember navigating this market, but the exact trigger for the sell-off remains unclear. The CDC timeline lists no major events on February 19 or 20, yet over the next 23 trading days, the S&P plummeted nearly 34%.

Like other major downturns (such as the 2008 Financial Crisis), the decline was not a straight drop. While 17 of those 23 days saw negative returns, including a staggering 12% loss on March 16, there were also six positive days, five of which saw gains exceeding 4%.

The rebound began abruptly. Despite no major listed events on March 24, the S&P surged 9.4% that day, marking the end of the COVID-driven crash. Since then, despite setbacks like a turbulent 2022, inflation spikes, and global conflicts, the S&P has climbed 196% from its March 2020 low.

The Importance of Staying Invested

Let’s step back and consider an eye-opening fact: the COVID market crash lasted just 23 trading days. The recovery was already in motion before the CARES Act was signed, before mask mandates, and before most Americans had shifted to remote work.

If an investor had the uncanny ability to sell at the top and buy at the exact bottom, they would have made a fortune. However, in reality, timing the market is nearly impossible. Most investors who tried to do so likely sold in fear as the market fell and hesitated too long to re-enter.

On the other hand, those who remained invested through the turbulence would have seen a 17.4% return from February 19, 2020, to February 19, 2021. Over the past five years, the S&P 500 has delivered an impressive 14.3% annualized return, nearly doubling in value.

Our Approach: The Bucket Strategy

This underscores why we recommend clients separate their investments into buckets. Our bucket strategy helps clients stay financially secure during market downturns while allowing their long-term investments to grow.

• Safe Bucket: This contains cash and low-volatility assets to cover short-term needs, providing a buffer against market swings.
• Growth Bucket: Designed for long-term investments, this bucket rides out volatility and benefits from market rebounds over time.

By maintaining a well-structured bucket strategy, investors can weather downturns with more confidence, ensuring they have access to funds when needed while still capitalizing on long-term growth opportunities.

Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and LFG Wealth Partners, LLC , makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision. Information contained on third-party websites that LFG Wealth Partners, LLC  may link to are not reviewed in their entirety for accuracy and LFG Wealth Partners, LLC  assumes no liability for the information contained on these websites. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from LFG Wealth Partners, LLC. For more information about LFG Wealth Partners, LLC , including our Form ADV brochures, please visit https://adviserinfo.sec.gov and search for our firm name.