After setting an all-time-high of 29,568.57 in February, the Dow Jones plunged into a bear market, losing more than 38 percent, as the outbreak of the coronavirus disrupted supply chains and sapped consumer demand.
The tremendous fall from the aforesaid peak reminds us with historical crashes, most notably the 1987 Black Monday, the 9/11 attacks and the 2007-2008 financial crisis.
In fact, this should raise a key question: Is it the right time to invest my money in stocks, taking advantage of the low shares’ prices, or the market could set a new bottom?
The Black Monday collapse forced the index to fall for two months, dropping 36 percent, but the other two downturns took longer time and formed many troughs.
So, investors buying from the lowest level had to wait for 48 months to see the Dow points returning back from the point it fell from.
On average, it takes 1,100 trading days to recuperate the territory lost during a bear market, which means 4.4 years (252 trading days), according to a Bank of America research.
That’s a very long time, so investors have to assess whether it is worth to hold their money for all this period or seek another investment option that can provide higher return in shorter duration.
But it is important to note that the past is not any guarantee of the future, especially as the fallout this is time was caused by a pandemic, and therefore finding a treatment or vaccine for Covid-19 may help stocks recover quickly.
It is worth mentioning that the Dow Jones have already recouped some of its losses, rebounding 22.5 percent, after the massive stimulus packages announced by the US Administration to mitigate the impact of the virus outbreak.
Remaining in quarantine
and lockdown for a long while could annihilate the positive effect of the
stimulus and push stocks even lower.