Y B 2028▶ Shoppers at a
Walmart in Wuhan on
Jan. 24, the day after
authorities imposed
travel restrictions▼ “The panic arrived
faster than I expected,”
Xie sayspriced into the market as 2020 got under way,
with the U.S.-China trade war widely believed
to be in the rearview mirror. At its last record in
February, the S&P 500 was trading at more than
2.4 times the sales of its companies, the highest
such ratio on record in 30 years of Bloomberg
data. The price-earnings ratio was 22.3, in the top
25% most expensive valuations since 1990.
This all left the market especially vulnerable to
a “black swan” event such as the novel coronavi-
rus that is wreaking havoc on economies and cor-
porations around the world—an event that central
banks and the government can’t mitigate easily
with their traditional toolkits.
The repricing has been sudden and violent.
The S&P 500’s last record was three weeks ago.
Perhaps, then, the recovery will be just as swift?
Making such a prediction would be ill-advised
in normal times and downright foolish when it
comes to a situation as unpredictable as this one.
While stock market history offers no past event
exactly like this one, recovering from other bear
markets has never been swift. The minimum time
it’s taken for the market to return to its highs in
previous episodes is 320 trading days, or roughly
15 months, according to Bloomberg strategist
Cameron Crise. The median is two and a half
years. Both the swiftness of the decline and the
heady valuation of the market at the beginning
could lengthen the recovery time.
What’s easy to predict is another bull market
will come eventually. It could have a different char-
acter. The long 2000s bull was built on the legacy
of the financial crisis. We may see the next rally as
the one in which businesses and investors adjusted
to the new rules of a world that’s lived through a
public-health crisis. —Michael P. Regan○ The 11-year bull market in U.S. equities is over,
at least by one measure. At the close of trading on
March 11, the Dow Jones Industrial Average had
recorded a 20% drop from its highest point. The
S&P 500 closed 19% below its high, just outside
of bear territory. But the events of recent days
had already provided the sense of an ending—
the world was anxious about much more than
stock prices.
“The most unloved bull market” is the nick-
name this rally earned, and for good reason. While
it was the longest in history, for much of its life it
never quite felt like a boom for most people. It was
born in the wake of the 2008 financial crisis and
a massive, controversial effort by the U.S. govern-
ment to rescue the nation’s banks. The rally was
fueled for years by companies buying back their
own shares, historically low interest rates, and the
Federal Reserve purchasing massive amounts of
bonds in what investors interpreted as an effort to
keep the party going as long as possible.
The rally added $28 trillion in value to U.S.
equities from March 9, 2009, to Feb. 19, 2020.
Chalking all that up to financial engineering and a
cooperative central bank is too easy, and it misses
the point. The leading companies of this bull mar-
ket were genuine innovators. Apple Inc. went from
being a $74 billion company in 2009 to a $1.4 tril-
lion company in 2020 not through financial engi-
neering, but by old-fashioned engineering. (In
fairness, there was some tax code engineer-
ing, too.) Amazon.com Inc. went from being a
$26 billion company to a $1.1 trillion company by
reinventing the retail industry. Google, Facebook,
Nvidia ... the list of companies that changed not
only our investment portfolios but also our daily
lives goes on.● How did it hold
up for so long?
The bull market seemed to withstand any
challenge thrown its way: the European debt cri-
sis, the loss of the U.S. government’s AAA rat-
ing at S&P in 2011, and the trade war. Maybe that
explains the indestructible sense of optimismat ha ene to
the bull market?
● Market value added
to stocks during the
long rally$28t