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How Quickly Can Stocks Recover From COVID-19?

posted 3/24/2020 in Investments

The market volatility continues, as the S&P 500 Index has closed either up or down 4% or
more for a record 7 consecutive days. With the S&P 500 Index down 30% from the highs,
it has officially moved into a bear market. Yesterday, we took a look at how stocks did
after the lows of major corrections formed, and today we’ll take another angle on this.

We do not know if down 30% is the lows; in fact, it probably isn’t. The good news is we
feel we are getting close to a major low. How quickly could stocks regain their February 19
highs? “Historically we’ve found that some of the quickest market sell-offs can lead to
some of the fastest recoveries,” explained LPL Senior Market Strategist Ryan Detrick.
“That’s the good news. The bad news is if the economy falls into a recession, it can take

As the LPL Chart of the Day shows, there have been 14 previous bear markets since 1950,
and it took an average of 20 months from the bear market lows to recover the losses*.
Taking this a step further, when the economy avoided a recession, the recovery took only
10 months, versus 30 months for a recession, although a lot of that is because bear
markets accompanied by recessions are typically deeper. Last, the last three bear markets
that avoided a recession recovered the gains in 3 months, 4 months, and 4 months after
the ultimate bear lows were made.

View expanded chart.  

We understand it’s tough out there and investors are understandably nervous, but we are
here for you. Please be sure to listen to our latest LPL Market Signals Podcast, where we
discuss our playbook for these troublesome times.

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advice or recommendations for any individual. There is no assurance that the views or
strategies discussed are suitable for all investors or will yield positive outcomes. Investing
involves risks including possible loss of principal. Any economic forecasts set forth may
not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the
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is historical and is no guarantee of future results.

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reliable sources; however, LPL Financial makes no representation as to its completeness
or accuracy.

The modern design of the S&P 500 stock index was first launched in 1957. Performance
back to 1950 incorporates the performance of predecessor index, the S&P 90. This Research material was prepared by LPL Financial, LLC. This Research material was prepared by LPL Financial, LLC. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

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