Market Resiliency
by Randall J. Cloud
Something very important played out from February 19th, 2020 to August 18th, 2020.
Responding to the pandemic and ensuing economic shutdowns, the financial markets around the world began their steep decline from February 19th to March 23rd, 2020. While not its steepest decline in history and as an example, the S & P 500 index declined 33.9 % over a thirty-three-day period which makes it the fastest steepest decline.
In the darkest days of March 2020, the public fell into the panic by taking swift action to sell their stocks. Hedge Funds piled on by stoking the public panic by publishing doomsday videos, audios, and emails. In addition, media companies around the clock reported outrageous doomsday news headlines.
As it goes with public panics, something comes out of the blue to quickly turn the tide of doom. In this case on March 23rd, 2020 the Federal Reserve announced it would provide unlimited cash to the bond and credit markets to ensure liquidity in the United States.
The S & P 500 Index did an about face and began its steep recovery reaching a new high on August 18th, 2020 in six months making it the fastest steepest recovery. While yet being another example of Market Resiliency, this episode is arguably at the top of the list as investors overcame the on-going health scare, global recession, and civil unrest all at the same time.
Market Resiliency simply means it is never over. Markets prices bounce back. Markets prices are forward looking. The Market ruthlessly and quickly prices in the opinions of the millions of investors around the world about the future for specific companies, industries, the U.S. Economy, and Global Economy. The long-term trend line is upward trending to the right with short-term market downturns along the way.