Corona Crash, How Much Will We Lose? How Long Will It Last?

24 มี.ค. 2020

With the current stock market collapse, inevitable parallels are drawn with previous stock market crashes.
Each crash is unique in its own way, with different causes and different market and governmental responses.
The Corona Crash is unique in that it is the most violent and volatile crash so far on record. So far it is not the biggest crash, nor of course the longest crash, but the ferocity in unparalleled.
Using the prediction and measurement tools available in TradingView I have mapped the previous crashes for comparison.

Anatomy of Crashes.

• 1929 Great Depressions: Lost 83%, Crash Duration 2010 Days, Full Recovery 24 Years
  
• 1973/4 Oil Crisis: Lost 35%, Crash Duration 700 Days, Full Recovery 7 Years
  
• 1987 Black Friday: Lost 35%, Crash Duration 61 Days, Full Recovery 2 Years
  
• 2000 Dotcom Crash: Lost 49%, Crash Duration 944 Days, Full Recovery 7 Years
  
• 2007 Credit Crisis: Lost 58%, Crash Duration 485 Days, Full Recovery 7 Years
  
• 2020 Corona Crash: Lost 33%, Duration So Far 28 Days, Full Recovery???
  

So, what can we learn from the historical stock market collapses?

The quickest market recovery was 1987 Black Friday which took 2 years. The last two crashes in 2000 and 2007 took 7 years to recover.

The Corona Crash is so far most similar in nature to the 1987 Black Friday Crash. This could mean that if our governments and central banks manage monetary and fiscal policy optimally, we might be out of this disaster in 2 years.

We are heavily dependent on vaccine development and deployment and even the most optimistic estimates of delivery date are November 2020, but realistically we are talking about 12 to 18 months.

This bear market will not go away anytime soon. We may see some stabilization, but bear markets to not disappear overnight. Additionally, typical market recovery, meaning the index reaches and new high (surpassing the pre-crash high) is between 2 years and 7 years.

Summary

* Average Duration 2 Months to 3 Years
* Average Full Recovery 2 to 7 Years
* Average Loss 35% to 58%

Not great news, but I hope this helps to prepare you mentally for what is to come in this Black Swan Event.

If you like this analysis, please like, share and follow thanks, Barry