As the markets gyrate in response to the likely upcoming recession caused by social distancing which is being used to fight the spread of the coronavirus, it is important to not get caught up in fear and to remember investment history.
JP Morgan, one of the Portfolio Strategists we utilize for client accounts, had some wise things to say about where we stand now in the investment markets in relationship to history. Today they wrote the following…
“Last week was another roller coaster ride as investors digested a number of developments around the monetary and fiscal policy response to the spread of COVID-19 and early signs of the turmoil it is likely to cause the U.S. economy. Notably, the Federal Reserve uncapped the amount of assets it could purchase, widened the scope of eligible securities and established other vehicles to ensure liquidity continues to flow through financial markets. Congress passed a $2.2 trillion fiscal package to help offset the financial toll on businesses and consumers. Elsewhere, data showed initial unemployment claims skyrocket to 3.3 million, breaking the previous record of 695K in 1982, and flash U.S., Japan and euro area PMIs for March are in deep contraction. While these ugly readings on the economy are likely to persist for some time, long-term investors should consider that since 1928, through 14 recessions and 21 bear markets, equity markets have never failed to regain a prior peak, and this time will be no different.
As shown in this week’s chart, regardless of time, gains achieved recovering from a bear market are substantial. Even if it took 5 years to get back to the new high achieved on Feb. 19, an investor would reap a 7.9% annual return from current levels. We are in unprecedented times, but markets will rebound, and the rebound will likely be significant.”