For comparison sake...ablo espanol?

May 06, 2020 | Jeremy Goldfarb


Much has been made about the comparison of the current pandemic and it's knock on consequences and that of the Spanish Flu of 1918. For today's sake, I am going to limit the discussoin to markets and try to hit on 3 disctinct points


1- waves - the first wave of the COVID-19 virus saw US equity markets shed approx 35% in value from peak to trough. Now, a large chunk of that has been recovered since (confoundingly so), but measured againts the Dow performance during the Spanish flu, we are getting smushed this time around. We don't have a second wave comparison "yet", but during the Spanish flu, the Dow saw a max drawdown of 11% so we will wait and see. Beyond that and into a small but existen third wave, the Dow surged. I am not going to go beyond this because then came the depression and I am simply not willing to entertain that argument right now.


2- breadth - simple point. The stock market recovery has been dominated by several sectors including tech and health care. Tough to compare against those of many years ago because....well.....those sectors largely did not exist. Recovery was dominated by industry, probably as a consequence of coming out of WWI


3- length. This to me is the key. How long to full recovery? The Pandemic in 1918 led right into the Great Depression so I don't have to tell you how that went. Misery, poverty, struggle.........I think we are positioned better today for a few reasons, but I will get to those in another post. Basically then, it was around 12 months of sideways with bumps in the middle. This time around, I can't see any case to argue where it will be any different.