The S&P 500 V-shape recovery hides a lot of cosmetic work
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Since the Iran shock on 27 Feb, the index has fully round-tripped. On the surface, that looks like a clean recovery. Quant Insight’s MFERM says otherwise.
When you compound macro contribution across the full 27 Feb to 17 Apr window, macro is still a net drag for 9 of 11 US sectors. Put simply: the shock delivered a sharper macro hit than the recovery delivered a macro tailwind.
That matters because most of the “good” performance still sits in the top-left of the chart below: positive idio, negative factor. In other words, sectors have recovered despite macro, not because macro has turned supportive.
A few things stand out:
• Tech is the only clean alpha story
XLK printed roughly +9.5% idio, with macro drag fully recovered. This is the one sector where stock-specific drivers, not macro repair, explain the move. The AI narrative survived the sell-off and strengthened in the rebound.
• Defensives did not protect
XLP, XLV and XLU offered little shelter in the drawdown and did not lead on the way back. Hiding in defensives was not the winning trade.
Continue reading our analysis by downloading the PDF above
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