The 2020 meltdown has already earned a spot amid those high-water marks. In fact, it’s already in a league of its own. Don’t bet on a V-shaped rebound once the stock market’s coronavirus-driven plunge finally hits bottom. Before the market can get on the road to recovery, the current bear market needs to run its course.
The average S&P 500 decline from peak to trough, during recessions over the past 50 years, is around 40%, which would put the index’s bottom at 2,050. After 10 years of being on steroids, this market is very fragile. The virus was the needle that pricked the bubble.
For now, there are three possible scenarios that can happen in the market:
- First possibility, the crisis is contained within four to six weeks, leading to a V or U-shaped economic recovery
- Second, the disruptions remain for about six to eight months and the slow demand can affect several industries.
- Third, and the worst-case scenario, where it goes on for a prolonged period.
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