Here is a bear market graph showing the traditional cycle, of sorts. We are right where the arrow is. (You can see it better in the link I provided below in the full article.)
What’s different now?
The world having stopped in many areas, with a huge decline, and, if this continues as is probable, there will be a continued decline, both in terms of lower production but possibly dramatically in the destruction of many businesses and supply lines. And consumer demand should fall precipitously (due to citizens having drained their savings), to much less than what is needed for a recovery for awhile.
The upside, which is not much in terms of the market, is that we have supported business and individuals with massive, higher than ever borrowing. That could save the world from the Great Depression that Ray Dalio has referred to - except that later he referred to the government’s willingness to do anything to save the economy. But nobody knows if it’ll be enough to do the trick. Is there enough money to do that?
And of course we cannot stimulate the economy anymore by “the other method”: lowering interest rates, as we’ve hit zero interest. Of course, some people refer to this meaning that there is no cost for all the debt added to the national debt. But that debt will not disappear and it is likely to greatly affect future generations who have to pay for it. (Make no mistake, the government’s move has been worth it and saved us from even worse repercussions. But it hasn’t saved us from a condition likely worse than the 2008 Great Recession.)
How much of a decline will there be? Well, no one knows, as there are too many variables and still a rather big club/axe that the government can wield.
But the odds, logically, seem to add up to a rather large impact on the permanent value of the companies on the market.
10% more upside? 50% downside as the coronavirus continues worldwide?
Article: This Is One Dangerous Rally
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