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Members of D.A. Davidson & Co.

How will stocks rebound from COVID-19?

"With the equity market having hit its last new high on February 19th of this year, the depth and speed of the market drop has been ferocious. The market fell -33.9% in just 24 days, over 10 times faster than the 2008 correction. Investors are getting increasingly used to market volatility reflecting the massive amount of uncertainty in light of COVID-19. The economy and corporate earnings recovery are especially relevant in order for markets to return to new highs. Research shows that the market tends to bottom well in advance of the economic data. On average, the stock market bottoms around 1.5 months before the peak in jobless claims and 4.5 months before the end of the recession.


  ...investors are still trying to determine if markets might retest the recent lows. Market timing is always excruciatingly difficult, and trying to gauge when markets will bottom in this environment is no exception. Given this, and as highlighted below, even if it takes 5 years to recover to the market peak, the average annual return over that period would be 7%. If the market recovers faster, say in 3 years, that implies a 10% average annual return. These are still very impressive returns, especially when compared to expectations for fixed income returns in this 0% interest rate environment."


(How will stocks rebound from COVID-19? dated April 9, 2020 by Samantha Azzarello, Global Market Strategist, with J.P. Morgan Asset Management)


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