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,

  • 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.

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