Markets might “retest” the March lows
Bespoke Investment group published an analysis of the near future of stock markets based on Wall Street history. According to the publication, shares can soon plunge back to the low positions seen this March.
The first trading session of May 2020 struggled to continue the gains of the previous month. Major indexes - Nasdaq Composite, S&P 500 and Dow Jones Industrial Average - lost 2%-3% after an impressive growth in April.
Bespoke analysts believe, that in the near future market might be acting the same as it does after any big recession. Their analysis is based on data dating back to 1928. According to the results of the research, most bearish markets tended to be briefly succeeded by bullish dynamics, only to hit new lows soon after. Bespoke’s report noted 11 major bear markets in the period of 1928-1940. 9 of them “retested” low positions.
COVID-19 crisis has been compared to the Great Depression on multiple occasions. Yet many investors and analysts believe, that the extraordinary stimulus measures implemented by the governments across the world can make a big difference, since nothing even remotely comparable to the current relief measures was seen before.
Nevertheless, there is still an issue of the dramatically reduced business activity. The Institute for Supply Management’s manufacturing index dropped to 41.5% in April - the lowest since April of 2009. It is also the steepest drop since 1951.