Lower again. US stocks opened lower, after big gains yesterday. Incredibly, Tuesday was the seventh consecutive day the S&P 500 Index closed either up or down more than 4%, an all-time record. As COVID-19 cases continue to grow and social-distancing efforts are strengthened around the United States and globally, expectations for economic growth and corporate profits continue to fall.
Stimulus plan is coming. Washington, D.C., plans to quickly deliver a stimulus plan, with estimates it could top $1 trillion. The Senate Republicans’ plan will include as much as $250 billion in emergency loans for small business and $50 billion for airlines. Additionally, the White House has proposed sending as many as two $1,000 checks directly to individual Americans. With unemployment expected to rise, fiscal stimulus is needed to mitigate the economic fallout.
How long until stocks recover? The S&P 500 Index has lost 30% during this bear market, and although we don’t know when the damage will end, we can look back at previous bear markets for a clue as to how soon things will recover. Since 1950, it has taken the average bear market 20 months for stocks to recover their previous peak. It’s important to note that if the economy is in a recession, it has taken 30 months on average to recover versus only 10 if there is no recession. We will take a closer look at this important concept later today on the LPL Research blog.
Trying to hold December 2018 lows. It has only been a few days, but the S&P 500 Index is trying to make a stand and hold above the 2346 level last seen in late 2018. While this is encouraging, the bottoming process can take time, and typically the initial decline is undercut by a second leg lower. Below 2346, we see technical support near the market highs from 2015-2016, around 2140.
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