In Economists Words- Seeing The Other Side Of The Stock Market Valley
Will this be a long and drawn out bear market like 2008? Or will it be a short, V shaped recovery like December 2018? Below is a collection of opinions from some of the brightest economists we follow (Hint, they think selling now will lead to some FOMO):
“After the bottom comes the emerging bull market. The economy is showing signs of a rebound, interest rates are low, and corporate profits are rising. So are stocks: The average increase in the S&P 500 the year after the bottom of a market cycle is 47%.”
-Fidelity Viewpoints, March 2020
“When you are able to focus on how much will be the same and see the other side of the valley, that’s really reassuring. It was a much different situation during the 2008 financial crisis because we couldn’t see the other side of the valley and how we were going to reach it. But this time is different, and that gives me hope. While the global economy and financial markets are going to be challenged for some time and government leaders will have to make tough decisions, I believe we will make it through this.”
-Rob Lovelace, Capital Group
A 30% drop from the top of the S&P 500 brings us to 2300-2400. I had originally expected 3,500 on the S&P 500 by year end, and we got to 3,300 in February. Now, I’m thinking 3,500 will be in 2021. There will be recovery and resumption of the bull market. I think it will be like 1987 all over again. Most of the downside should occur between now and the middle of the year. My year-end target is 2900 on the S&P 500.
-Ed Yardeni, Economist
V-shaped recoveries in stocks usually follow “event-driven” bear markets…expect the S&P 500 to end 2020 at 3,200 -- a 60% rally from 2,000. “The lesson of prior event-driven bear markets is that financial devastation ultimately allows a new bull market to be born”
-David Kostin, Goldman Sachs
“A Coronavirus Recession may sound like a reason to sell, but it's not. Stocks typically rise starting 3 - 6 months before a recovery. We're already in that window. Those who sell now are likely to regret it.”
-Brian S. Wesbury - Chief Economist at First Trust
The impact on economic activity will likely be sharp – and deep. Yet we believe that the sharper the containment measures taken and the deeper the economic hit in the near-term, the more confident we should be about the rebound after such measures are lifted. We see the shock as akin to a large-scale natural disaster that severely disrupts activity for one or two quarters, but eventually results in a sharp economic recovery.
-Mike Pyle, Global Chief Investment Strategist at Blackrock
The global financial crisis was a house of cards falling down, a crisis of excessive leverage, with the financial system itself in jeopardy. The system is sounder now. And although we do expect that global economies will contract in the second quarter, we believe that most will be in a position to rebound strongly later this year and early next year when the virus-related shock subsides and pent-up demand emerges.
-Joe Davis, Vanguard Global Chief Economist
Sources:
https://www.fidelity.com/viewpoints/investing-ideas/the-market-cycle-and-investors
https://www.capitalgroup.com/advisor/insights/articles/rob-lovelace-looks-ahead.html
https://www.barrons.com/articles/why-the-bear-wont-depart-until-midyear-51584030809
https://www.ftportfolios.com/Commentary/EconomicResearch/2020/3/16/fed-fires-bazooka-at-coronavirus
https://www.blackrock.com/americas-offshore/insights/weekly-commentary
https://advisors.vanguard.com/insights/article/coronavirusdownturnoutlook