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Chart of the week

History suggests the market recovery could be long and slow

Long, slow and volatile recovery? Our chart illustrates why investors might want to prepare for an extended period of economic uncertainty.

May 15, 2020 | 1 minute read
  • Markets moved lower this week after policymakers delivered a double dose of sobering economic and health-related news. On Tuesday, Dr. Anthony Fauci warned lawmakers of the dire potential consequences of reopening the U.S. economy too soon. On Wednesday, Fed Chair Powell cautioned that the economic rebound could be subject to “significant downside risks.”1   
  • This week’s activity punctuated the broader caution that has consumed markets recently. On the heels of their best April since 1987, stocks have largely remained rangebound in May.
  • The tempered sentiment of late has served as a reminder that stocks’ recovery amid today’s historic economic challenges may not be quick or easy.
  • The chart shows the length of time it took for the S&P 500 to return to its previous peak following historical sell-offs.2 As it highlights, the two most recent recessions featured extended declines and markedly longer ensuing recoveries – nearly 2x and 3x the respective declines.
  • While it’s impossible to know what type of recovery lies ahead, investors may be wise to prepare for a long, slow and sometimes volatile path. This is particularly possible given the extraordinary range of potential drivers of volatility today – whether related to COVID-19 vaccines and treatments, equity valuations, geopolitical tensions or slow consumer demand.

  • U.S. Federal Reserve, https://bit.ly/2Ltfs5T.

  • Bloomberg Finance, L.P. and FS Investments. Recovery periods are rounded and measured in months.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

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