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We were looking for a rebound after last week's lurch to the downside. Yesterday was the 11th biggest percentage day in the last 80 years . . . and the biggest point gain ever for the S&P 500 and Dow industrials. It's great. The only question now is how fast our stocks recover their recent losses and get back to work.


The first bit of good news this week is that we have a pause in our earnings calendar, so there's no immediate potential for company-specific distractions or disappointment. Next week, we'll check in on a few BMR companies and see how much (or how little) the now-global outbreak affected their operations. For now, it's all about the big swings in sentiment that crushed close to 95% of all stocks last week and then sent 75% of them back up yesterday.


Do the math and 85% of the market is still underwater. There's a lot of ground left to recover before the recent downswing is completely resolved. Most of our stocks remain in technical correction territory, down at least 10%. Only a few extremely popular or resilient names like Square (SQ), Berkshire Hathaway (BRK-B) and Okta (OKTA) are even 7% from their 52-week high at this point.


It isn't a coherent list. Some defensive areas of the market like Big Pharma sold off along with everything else . . . many of our REITs are down 20-30% now even as they come roaring back. BlackRock Income Trust (BKT), Invesco Municipal Trust (VKQ) and Nuveen Municipal (NVG) have been the only bright spots. Investors looking for absolute safety have crowded into these funds, preventing appreciable losses there. Only 2% of the market is in a similarly enviable position. If you're looking for shelter, this is the place.


But if you're hunting long-term upside, we suggest starting with the most battered stocks as they recover. Big Tech has only receded to late 2019 levels, so there isn't a lot of motive for urgency there . . . maybe you can grab an 8-10% discount here, but if you weren't eager to buy a few months ago, the situation really hasn't materially changed.


The Special Situations, on the other hand, often turn into substantial reservoirs of future upside when the market as a whole shakes. We recommend them when they're already in a weakened state. Now Financial Select Sector (XLF), U.S. Energy (IYE) and especially Occidental Petroleum (OXY) have been taken down to extreme levels. The fundamental situation around these recommendations hasn't worsened in the long term. While interest rates will likely recede in the near term and oil remains weak, both will recover in the foreseeable future. When they do, investors with foresight can do quite well riding the rebound.


And we can say that for nearly all stocks in the BMR universe. It's only a matter of how far each one needs to come back before returning to levels we know the market will support when the mood turns . . . and how long it will take them to get there. After that, we'll simply have to see how far they can run into record territory before the next wall of worry knocks them back. Cycle after cycle, year after year, that's just how the market works.