Everything looked good and promising in January. It was the start of a new decade, people were feeling optimistic, and random reports of a virus spreading in Asia didn’t seem to worry anyone in Europe or America.
In late February there was a sharp change in the tone. Mobile World Congress in Barcelona was cancelled due to the coronavirus and I remember pondering with my with my colleagues if it would be safe to travel to Berlin for SuperVenture 2020. We ended up going but that was the last physical conference we would attend for a while.
During the first and second weeks of March things escalated even further. Many global tech companies instructed their employees to start working from home and you could feel how the panic was rising everywhere. The fact that we knew very little about the virus and had limited testing possibilities made things worse.
The stock markets had peaked on February 19th (S&P 500 at 3386 and Euro STOXX 600 at 434), but had taken a first serious dip already by the end of February. In March all hell broke loose and on March 23rd S&P 500 was down to 2237 (-34%) and Euro STOXX 600 down to 280 (-35%). This was the fastest 30% sell-off ever, exceeding the pace of declines during the Great Depression.
S&P 500 index from January to June 12th. A record fast -30% sell-off and a remarkably quick recovery. Image: Google Finance
One can of course ask if the stock market overreacted. Certainly the unemployment numbers coming out especially from the US were grim. There was also the oil price war between Russia and the OPEC countries led by Saudi Arabia. Financial institutions all over the world produced harsher and harsher forecasts about the global economy. The longest economic expansion in history was declared over and we had officially gone into recession.
It is, however, the miraculously quick rebound of the stock market that prompted the question in the headline above. Just a few days ago Nasdaq made a new all-time high at 10,020 (June 10th). The S&P 500 rose all the way up to 3232 on June 8th, and even the Euro STOXX 600 was up at 375 on June 5th. If the drop in the markets was record fast, then the same can certainly be said about the rebound as well.
But has the economy recovered at all? Is the COVID-19 crisis really over? Nobody can know for certain what will happen in the autumn, but many researchers and medical professionals are warning about the possibility of a serious second wave of the virus. And in the US they have – on top of all the misery caused by a pandemic – massive civil unrest and political uncertainty ignited by the killing of George Floyd.
Yet, if you look at the stock markets and the US market in particular, it would seem as though everything is just as rosy as it was in January. I find this completely absurd.