And while we don't know yet how severe the economic consequences will be, we can at least assume that both times (1929 and 2020) saw (and will see) economic contraction and a rising unemployment in the following quarters.So, it definitely makes sense to compare 2020 to 1929 and keep the Great Depression and the stock market crash as a warning example in mind - even though I don't think the stock market will fall so steep. Find out on Thursday’s podcast!China Stocks Hit By Trump Executive Order Targeting TikTok, WeChatWarren Buffett Stocks: Lululemon, Veeva Among 29 Stocks On This ScreenThe Path to Recovery: What’s Next?
We can see that the stock market actually rallied during that time. In his normal weekly market analysis in April 2010, Robert realised that the bear market that started in late 2007 (see chart 2007-2012 above) was unfolding with a very similar shape to the bear market of 1989-1993 (labelled "Bear Market E" in the chart of 1987-1996 above, or see a close-up and detailed version in the Members' Area).

36 15 6 8 18 21 20 3 3 31 17 1946 1956 1961 1966 1968 1973 1980 1987 1990 2000 2007 Bear market lengths The two worst peak-to-(months) trough losses occurred in the 2007-2009 (down 57%) and 2000-2002 (down 49 %). The Nasdaq composite sank 46 points to 360.21, down 11.3%.


In order to determine potential targets where the bear market might come to an end, we can use different methods.We can for example use valuation metrics like the CAPE Ratio. Authors may own the stocks they discuss. While the comparison to 1987 could make sense because of the similar steep correction, the comparison to 1918 and the Spanish Flu make sense as the threat was pretty similar and it's probably the only pandemic with millions of people killed where we have extensive (financial) data. The most reasonable estimates assume about 50 million deaths in the timeframe between January 1918 and December 1920 while other estimates see the number as high as 100 million people killed all over the world.I read articles comparing the current stock market correction to the bear market in 1917 (marked yellow) and you probably see for yourself why this is complete nonsense as it was not before March 1918 that the outbreak of flu-like illness was detected in the United States and the first mention of influenza appears in an April 5 weekly public health report (The Spanish Flu occurred in three waves (the first wave occurred in the spring of 1918, the second wave occurred in the fall of 1918 and the third and final wave occurred in the winter of 1918 and spring of 1919) and I marked that timeframe red in the chart above.

In my opinion, the absolute worst-case scenario would be a drop to the 2009 lows, which would reflect an 80% decline (but I consider that scenario as rather unlikely).While many people seem to be extremely bullish again and assume that we already saw the low on March 23, 2020, I think stocks and the major US indices will drop lower.

Stocks plummeted on Thursday as the Dow dropped 10% for its largest drop since Oct. 1987, while the S&P 500 shed 9%, closing in bear market territory to officially end the bear market. The stock market also was trading below the long-term trendline (in 1920, the Dow Jones Industrial Average was trading 59% below the long-term trendline) and all these distinctions make it hard to compare the two times.Long story short: It doesn't make any sense to compare the current situation of the stock market to the situation during the years 1917 and 1921 and trying to draw any conclusions about what might happen in 2020 in the stock market or how steep the market might fall is just nonsense.I don't want to scare anyone and spread doom and gloom, but while we mentioned above that the current correction looks similar to the correction (or, bear market) that happened in 1987, there's another famous bear market, which started very similar with a quick and steep correction but turned out to be completely different than the 1987 correction.


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