Impressive Q1 Recovery Looks Promising for Stock ETFs

After the equities market plunged toward a correction by February and recouped the loses all within the first quarter, the big swings could augur a good year for stock exchange traded funds.

The SPDR S&P 500 ETF (NYSEArca: SPY) plunged about 10% from the start of the year through February 11 and then surged 12.7% through March 31. SPY is now up 1.6% year-to-date.

The S&P 500 has experienced a sharp pullback followed by a speedy recovery only a handful of times, but after each instance, the stock market typically ends out the year with a bang.

The S&P 500 has dropped over 10% from a closing high and rallied over 10% from a closing low at some point in the first quarter only nine times in the past century, according to Bespoke Investment Group.

On average, the S&P 500 has seen a gain of 28.3% or a median return of 32.0% for the remainder of the year with positive returns 75% of the time after a negative and positive 10% swing over the first quarter.

More recently, the S&P 500 plunged 27.6% in the first quarter of 2009 before the index surged 23.1% and ended the year up 39.8%.

While past performances are not necessarily indicative of future returns, the volatility in prior first quarter S&P 500 performances and subsequent rally for the rest of the year may reassure investors that the equities market can continue to perform.