April 7, 2020 – 


March 2020 Market Update


After peaking on February 19, 2020, the U.S. stock market declined 34% in less than a month before rallying to finish the quarter down 20%. It was the fastest bear market in history.  As of March 31, U.S. stocks trade at January 2019 price levels.  The spread of the coronavirus outside of China has reduced economic activity in the U.S. and globally. The decline in stock prices reflects the reality that lower economic growth will result in lower than expected corporate earnings. Uncertainty over the depth and duration of measures to minimize the impact of COVID-19 is high. The chance of a recession has increased and is all but assured. The pace and timing of market recovery will likely hinge on signs of the virus spread slowing and businesses and employees returning to work.


Figure 1

Market Returns as of March 31, 2020









Source: Tamarac



Central banks have lowered interest rates to stimulate economic activity and injected funds into the banking system to support trading activity and liquidity. Federal, state and local governments here and abroad are supporting workers and families displaced from furloughs, layoffs and business contraction through unprecedented stimulus programs, including business grants and loans and expanded unemployment benefits. The combined stimulus actions of the U.S.  Federal Reserve and Federal government is estimated at $5-$7 trillion, or 23% to 33% of the U.S. economy (2019 GDP). This is the largest stimulus ever, more than four times as large as the stimulus efforts in the Great Financial Recession of 2007-2009.  Companies are encouraging employees to work remotely, and companies and communities are working together to support each other. Brighter days lie ahead, but stock volatility and negative headlines surrounding the healthcare crisis, unemployment, and economic pressures will dominate in the near-term.



The three most frequent questions from clients are:

How long will the bear market last?

While each bear market is different, history provides some baseline expectations. Since 1835, there have been 28 bear markets. A bear market is a 20% decline in stock prices. The average bear market lasts 27 months. The average price decline is 37% and the average recovery period is 60 months. The most recent bear market, 2007-2009, lasted 17 months and prices declined 57%. The recovery took 60 months. The amount of the decline, length of the bear market and recovery period for structural (financial bubble and systemic imbalance), cyclical (economy overheating, traditional business cycle) and event driven (natural disaster, event typically contained to one sector or region) differ (see Figure 2). A reasonable assumption is the U.S. stock market will take two to four years to recover.


Figure 2

History of Bear Markets: Average Decline, Length and Recovery Period









Source: Goldman Sachs Investment Research, Bloomberg


What will make the market stop declining?

Stocks are a leading indicator for the economy. This means that they typically fall before the economy is officially in recession and recover before economic growth resumes. No one knows what will cause the stock market to bottom. In fact, it may have already, but we will not know until more time passes.  If stock pressures continue, the possible cause or combination of causes that help the market bottom are:  1) slowing the virus spread (e.g. new cases peak), 2) evidence that fiscal and government stimulus is working (e.g. rate of economic decline slows), 3) peak pessimism and bear position (e.g. stocks as % of overall investor holdings reach previous bear market levels) and 4) other “green shoots” including a proven vaccine, better than expected corporate earnings, greater stimulus (e.g. new infrastructure bill) or once-in-a-generation valuations. The bottoming out is more of a process than an event. We will not know when it happens, nor do we believe timing the market is an effective strategy.


What should we do?

Prior healthcare crises, recessions and financial shocks also resulted in heightened stock price volatility. Ultimately, fears subsided and investors were rewarded for sticking to their plan. The recent decline in stock prices serves as a reminder that stocks are long-term assets primarily suited to fund long-term financial goals. Holding sufficient and less volatile assets, such as cash or bonds, provides a buffer of protection and greater funding visibility for short to medium term financial needs. Other non-stock financial resources, such as employment income or social security and pension income, often serve a similar capacity.

A meaningful decline in your financial net worth creates uncertainty, anxiety and doubt. The economic jolt from the coronavirus has created changes in employment status and earnings expectations for families and businesses, and has sowed fear. We understand that and are here to listen, update your financial plans, and discuss any needed portfolio changes. We know these are extraordinarily challenging times.  We hope that you are healthy and safe and look forward to meeting in person in the not too distant future.