Second year of a rebound usually worth sticking around for, says S&P

Don’t bail out of the stock market just yet.
If history is any guide, 2010 could be kind to investors, Sam Stovall, Standard Poor’s chief investment strategist, said on a conference call today.
“The second year [of the recovery] could be good one, but not a great one” compared to last year, Mr. Stovall said.
Through Jan. 5, the S&P 500 has recovered 52% of its losses from the peak in October 2007 to the March 9 low, Mr. Stovall said.
From 1932 to 2003, first-year recoveries have gained back 82% of the loss.
Due to severity of the recent decline, the index has bounced back more than average, picking up 68% since March 9, versus an average of 46% historically.
The average recovery sees two 8% corrections in the first year. The current recovery has already had two setbacks averaging 6%, Mr. Stovall said.
The third year of a recovery typically sees stock market returns diminishing to single digits, he said.
Cyclical stocks tend to keep outperforming in the second year, but “the magnitude and frequency [of outperformance] tends to come down a little bit,” Mr. Stovall said.
S&P is predicting an 11% total return for the S&P 500, to 1215, based on estimated earnings of 76 on the index.