How the share market crash compares with history

Last night’s crash in the S&P 500 was one for the ages and saw the index plunge by nearly 12%:

The S&P 500 has now plunged 30% from its 19 February peak and has erased all of 2019’s gains, which were the second best over the 11-year bull run.

The next chart shows how yesterday’s crash compares with prior events:

As you can see, this current crash is the steepest on record but not yet the deepest.

Goldmans believes the S&P will bottom-out at around 2,000 points. If true, this would represent a 41% peak-to-trough decline.

Personally, I believe a decline closer to 50% should be expected.

Leith van Onselen

Comments

  1. Not too dissimilar to that 2007-9 one when it got going, where we did a bit of up-and-downing about here, then pushed on to 56% down.

      • Yes, happened in multiple places during the GFC. Why would ZIRP stop stocks crashing?

      • Many companies have bonds outstanding that aren’t zero coupon. So holding stock could mean you’re holding a company in default or about to go bankrupt.

        FED rates and repos are only for banks, by the time they put their margin on top you’re not actually paying 0%.

        Also we’ve already seen several companies have their credit ratings downgraded which impacts the rates they need to pay for issuing corp bonds.

        • Thanks for this insight David.

          The interaction between equity / shares, capital and debt is something I’m a bit shaky on but I can fully grasp that there are companies that are worthless without revenue (in fact some companies were losing money hand over fist, day to day even in the “good times”’six weeks ago) and are going to zero even if free debt is being sloshed around in the gazillions.

        • Real Vision video earlier in the week suggested the Repos are not being taken up by the banks because they are unwilling to take on the risks of lending the money to businesses. i.e. Central Banks are not properly setup to be the lender of last resort.

      • DingwallMEMBER

        It’s also not just a cash rate at zero….. overlay 6-9 months of CV impacts to small to big businesses and the oil dramas …

  2. S & P 500 should be around 1200 by the end of the year…….a UBI like Ms Gabbard has proposed in the US is the only thing that will give people hope enough to hang tough. Looking for about 2850 here like in the GFC depending on how much of the Chinese economy is still going……keeping furnaces running for engineering reasons doesn’t mean you sold the steel.

  3. The upside risk here is an effective vaccine and anti virals proven to work, en masse.

    Which bet will you take. Science is lining up, hard, to get the treatment sorted.

  4. LNP will have to bail out QAN one would imagine… I just took the Per > Melb flight first thing this morning… 9/10 seats empty…

    I wonder what kind of support VAH will receive.

    • frag outMEMBER

      Was just thinking that, the current flights cancellation isn’t particularly sustainable.

      So which airlines will Govts choose to save, and which to let go, and why.

      • Tried to cancel VAH booking to MEL in May.
        Flexi fare, but $70 cancellation on a $300 booking.
        Contacted Velocity FF for a no penalty refund or Travel Bank.

    • I would hope any bail outs to the airlines take the form of common stock, or a convertible note. Taxpayers should be rewarded with equity for saving businesses.

    • I believe VAH was in trouble before Corona so I’d say they’re basically toast as we speak.

    • It will be seriously interesting to see what happens in desirable regions, particularly those that are water-secure.

      Will there be some level of permanent flight from SydMelb?

  5. Hopefully this puts an end to globalism and having EVERYTHING made in China. Imagine the globalists had there way and we didn’t have borders we could shut.

    • The “freedom to travel is a human right” argument crushed.

      I recommend listening to the Jolly Swagman podcast on the issue. The guy presented to WHO many years ago warning them that their mathematical modelling on global spreading of viruses is rubbish, and that this day was coming.

  6. Fabulous charts Leith.

    The speed is the thing. To get to this point in the GFC took 8 months. This has taken 2 weeks. If we extrapolate over the next 2 weeks… well… it ain’t pretty.

    • Makes sense. After all the GFC was really only a construct of financial markets. It could effectively be fixed (for a while) at the flick of several fairly complicated switches, once we found the right switches.

      Now where’s the switch for “cure virus” and “resurrect dead people” and “stop living people from knifing each other over a tin of beetroot”.

      • And there it is. Financial problems such as excessive speculation can, perhaps with difficulty, be solved by financial solutions. Financial problems that are caused by real world events that variously frighten and kill people will never be fixed by financial trickery.

        “Thousands are dying…thousands more may die!? Quickly…Reduce interest rates, adjust LIBOR and call meetings with the CEOs of the big 4 banks and the Senate Estimates committee. That will fix thing!” Yeah, nah. Those bank chairmen will soon be drowning in their own mucus anyway, as some of our politicians are now.

        The German and Japanese tyrannies in WW2 weren’t defeated by fiddling with interest rates, because they were a real world problem. Same-same with Corona chan.

        • boomengineeringMEMBER

          Referring to previous post about a mountain of bad experiences between us.
          A BAD EXPERIENCE IS BETTER THAN NO EXPERIENCE. Lock it in.

    • Would have thought you’d have learnt by now the folly of extrapolating or annualising short term movements? Some ppl never learn eh?

      • Nice to hear from you Gollum. 🙂

        You know, I’m 6’4, 200 pounds of muscle, fit, lean, healthy, got a family that loves me, a loving partner, a successful career, the respect of my colleagues, over a million dollars in cash and investments, a variety of interests and a bunch of good mates all over the world who have my back. Nothing’s perfect of course, but I’ve been lots worse off and I’m pretty happy with how things are turning out, even with the recent shenanigans.

        You, on the other hand, are a very strange bloke who calls himself bog roll, which says a lot about your own opinion of yourself. You clearly get some sort of thrill, probably of a sexual nature, by going into forums like MB and grossly insulting people in the hope of provoking an angry response presumably so that you can then run into the toilet and fap away at your tiny, unattractive member. Not that there’s anything wrong with that. No doubt there’s 20 or 30 websites where you pop up under different names to insult random people for no reason, and that’s great. Go, you!

        If it hasn’t already occurred to you though, insulting random people on the internet who don’t know you and don’t care about you is a really strange and creepy thing to do. It indicates, to all us normal and successful people, that you are, as the they say in the psychological profession “not right in the head”. Beyond that, it’s just not profitable. Seriously, there’s no money in it. Therefore, I suggest that you spend some time carefully reflecting on where your life is going, and perhaps considering seeking some sort of help.

        If you choose not to, and you decide that saying rude things to various punters on MB is where your dreams have lead you and is the pinnacle of your ambitions… well that’s great! Good on you! Everybody has to have an achievement to be proud of, and if your big achievement in life is insulting me and a few other blokes here, well, that’s so worthwhile. Trim your neck beard, adjust your Fedora, ask your mother for another milkshake, return your embedded micro-peni$ to its rightful place below your stomach bulge where you can’t see it and turn to your keyboard to launch another rapier like sally at the MB tards.

        Just realise while doing so that nobody cares about you. Your opinions and abuse are worth less than ladybug poo blowing in the afternoon breeze to the serious men and women who discuss serious m tters in this forum. Seriously. Nobody here cares what you think. Nobody cares whether you live or die.

        Carry on smartly now.

        • Top rant.

          Maybe he’s called Bog Roll because fat bogans keep fighting each other to pick him up in the supermarket. And that’s the romantic part, you don’t want to know what happens next!

        • For a person that supposedly has so much you are really sensitive to perspectives that disagree with your own.
          If I were picking losers between the both of you – you wouldn’t be off the list.

          • Just croak already u old cuck. No wonder ur two ex wives left u and took off with your assets. Hopefully third time lucky, huh? Seems that skull really is quite thick

      • Oz cases are now doubling about every 3 days.
        Today 452
        20th 900
        23rd 1800 uh oh nearly 2000
        26th 3600
        2000 is around the real take off, hold ya hard hat point.
        So we got about 9 days before it starts getting real ugly.

      • I hope you’re not calling me a permabull

        I’m in the whatever it takes/omnipotent central banks camp

        Market is rigged. Anyone trying to predict what will happen is going to look foolish

        Let’s be honest – if it wasn’t for the covid shutdown, we’d still be 18 months (TM) away

        • I am. Where there’s smoke, there’s fire, and gloating about a one day rally from the bottom of a 30% drop is like a horizon that’s billowing with thick smoke.

          Central Banks are always falsely treated as omnipotent; there’s a reason it was originally called the Greenspan Put, and that’s because the phenomenon is decades old (3 recessions and counting).

          If I’m honest, we were always late cycle. The signs were everywhere.

    • Day trade this mess at your peril. That said BBOZ is probably a solid bet if you can just shut your eyes and hodl for another month. You will be rich. But I don’t have that much intestinal fortitude, cash for me and wait and there might even be nice house for me at the end of this.

      • Sounds like a plan. Me too.

        My partner’s ex works in a hospital in QLD in some kind of research role. He’s bailing out and sheltering in Canberra so she’s moving in with me. Ex wife number one runs a gym, so my sons are bailing on her and moving in with me.

        More helpers on the ammo production line.

  7. Peachy the house levatator

    Rud really sticking the boot in. No politics during crisis koala please scrotos on his knees now why have you forsaken me what was that job

  8. Don’t forget that we are in the era of funny money, and QE is unlimited and politically acceptable. That’s why it is impossible to predict anything last couple of decades.