{"id":2217,"date":"2020-10-20T13:46:00","date_gmt":"2020-10-20T17:46:00","guid":{"rendered":"https:\/\/www.edegan.com\/blog\/?p=2217"},"modified":"2020-10-20T14:42:40","modified_gmt":"2020-10-20T18:42:40","slug":"the-pandemic-stock-market-crash-of-2020","status":"publish","type":"post","link":"https:\/\/www.edegan.com\/articles\/the-pandemic-stock-market-crash-of-2020\/","title":{"rendered":"The Pandemic Stock Market Crash of 2020 Predicted to Worsen"},"content":{"rendered":"\n

Readers of American financial news<\/a> might think that the pandemic stock market crash of 2020 happened in March and is over. That’s objectively not true: the pandemic stock market crash is still going on right now<\/strong>, and an analysis of past crashes suggests it’s about to get a lot worse<\/strong>.<\/p>\n\n\n\n

A crash is not just a substantial daily or monthly decline. Instead, stock markets have two modes: crash and boom. The market is in a crash from its prior peak until its recovery. And seven out of 12 of America’s last stock market crashes have had at least one faux recovery.<\/p>\n\n\n\n

Indices track the market. I use the Dow<\/a>, but you can use the S&P 500<\/a>, the Russell 3000<\/a>, or whatever you like<\/a>. The Dow’s most recent prior peak, before it suffered substantial declines, was of 29,551 points on February 12th, 2020. It hasn’t sustained that value again yet. Ergo, the U.S. stock markets are in a crash!<\/p>\n\n\n\n\n\n\n\n

U.S. stock markets are in a crash!<\/p>

Around five-sixths of the pandemic crash is still to come.<\/p><\/blockquote><\/figure>\n\n\n\n

(Nit-pickers<\/a> among you may ask how to define substantial decline <\/em>and sustained recovery<\/em>. The data suggests the answers are 5% daily declines and one month of trading<\/a> (i.e., 21 consecutive trading days), respectively. Likewise, followers of the S&P500 may ask whether this works for them. The answer is yes: Using the S&P500, U.S. markets are in a crash. The S&P500 achieved a peak of just over 3,386 on February 19th, 2020. To date, the longest consecutive series of trading days surpassing this value was 11 days long, ending on September 4th. We have had eight consecutive trading days above the past peak since October 8th. Accordingly, using the S&P500, the soonest the crash could end would be November 5th, 2020.)<\/p>\n\n\n\n

Learning From Past Crash<\/span>es<\/h2>\n\n\n\n

More importantly, there are good reasons to believe that, in terms of its duration and its value destruction, around five-sixths of the pandemic crash is still to come.<\/p>\n\n\n\n

Stock prices are inherently unpredictable. As any financial product vendor is required to tell you, past returns are not indicative of future performance. However, stock markets do show what economists call “empirical regularities.” Think of them as reoccurring patterns. For example, the market typically drops a little in September<\/a>.<\/p>\n\n\n\n