• 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.

1 U.S. Federal Reserve, https://bit.ly/2Ltfs5T.
2 Bloomberg Finance, L.P. and FS Investments. Recovery periods are rounded and measured in months.


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