Well that escalated quickly. We are now officially in the second fastest bear market on record. Bear markets become official when stocks fall 20% or more from their peaks. Ordinarily this takes months to play out. Bad news comes out, stocks sell off a bit. Everyone goes home, thinks about it, and comes back the next morning. More bad news comes out, stocks fall a bit further, and so on. Here’s some data from Marketwatch on how long it typically takes to enter a bear market:
With the Coronavirus driving the U.S. and much of the world to shelter in place, our economy has come to a screeching halt. Some forecasters are guessing that we’ll see a 5% drop in GDP this quarter, others are predicting as much as a 30% drop.
Whatever camp you reside in, the picture is not pretty. Markets did not take long to notice. Whereas it takes on average 136-137 trading days to enter a bear market based on the data above, it only took us 19 to get there this time – the second fastest on record:
So where do we go from here? A stimulus package is just about to be passed (finally). Markets rebounded as much as 12% yesterday and another 4.5% today. Even though the public health picture still looks bleak, we are starting to wrap our heads around how long the pandemic may continue.
Here are a few things I’m reading and my thoughts on what happens next.