Bloomberg Businessweek USA 03.16.2020_

Y B 202

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▶Shoppersata

WalmartinWuhanon

Jan.24,thedayafter

authoritiesimposed

travelrestrictions

▼ “The panic arrived

faster than I expected,”

Xie says

pricedintothemarketas 2020 gotunderway,

withtheU.S.-Chinatradewarwidelybelieved

tobeintherearviewmirror.Atitslastrecordin

February,theS&P 500 wastradingatmorethan

2.4timesthesalesofitscompanies,thehighest

suchratioonrecordin 30 yearsofBloomberg

data.Theprice-earningsratiowas22.3,inthetop

25%mostexpensivevaluationssince1990.

Thisallleftthemarketespeciallyvulnerableto

a “blackswan”eventsuchasthenovelcoronavi-

rusthatis wreakinghavoconeconomiesandcor-

porationsaroundtheworld—aneventthatcentral

banksandthegovernmentcan’tmitigateeasily

withtheirtraditionaltoolkits.

Therepricinghasbeensuddenandviolent.

TheS&P500’slastrecordwasthreeweeksago.

Perhaps,then,therecoverywillbejustasswift?

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

○The11-yearbullmarketinU.S.equitiesis over,

atleastbyonemeasure.Atthecloseoftradingon

March11,theDowJonesIndustrialAveragehad

recordeda 20%dropfromitshighestpoint.The

S&P 500 closed19%belowitshigh,justoutside

ofbearterritory.Buttheeventsofrecentdays

hadalreadyprovidedthesenseofanending—

theworldwasanxiousaboutmuchmorethan

stockprices.

“Themostunlovedbullmarket”isthenick-

namethisrallyearned,andforgoodreason.While

it wasthelongestinhistory,formuchofitslifeit

neverquitefeltlikea boomformostpeople.It was

borninthewakeofthe 2008 financialcrisisand

a massive,controversialeffortbytheU.S.govern-

menttorescuethenation’sbanks.Therallywas

fueledforyearsbycompaniesbuyingbacktheir

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.comInc.wentfrombeinga

$26billioncompanytoa $1.1trillioncompanyby

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 optimism

at ha ene to

the bull market?

● Market value added

to stocks during the

long rally

$28t