Financial Industry Insights from Advisors Asset Management


The Markets Sense Recovery Long Before We Do

As seen in the WealthManagement 2020 Midyear Outlook.

With the nation plunged into crisis, it's difficult to imagine an economy where employment has stabilized, dormant sectors have resumed normal activity, and the stock market has regained its bullish steam. A proper recovery, however, could materialize earlier than we think.

While we can't predict what course the nation will take in the wake of racial upheaval and COVID-19 devastation, history does tell us a few things about the resilience of markets in times of crises.

It's true we are experiencing a deep recession and staggering job loss, but it's also true the government committed a record amount of spending and direct air in the form of $2.8 trillion in unemployment benefits, loans, cash and COVID-19-prevention funding, with indications a second round of stimulus checks could be coming. At least some of that money would be injected into the economy after June, potentially setting up the second half of the year for a significant recovery, if not a bull market resurgence. 

What indications do we have that such an upswing could happen so long before the pandemic subsides? The Spanish Influenza outbreak of 1918, the best pandemic documentation we have, offers some insights, having infected 500 million people, or 27% of the world population. 

Despite killing as many as 50 million people, the Dow Jones Industrial Average began its recovery that same year after a short recession, long before the infection rate peaked. The recession also gave way to a bull market, which saw stocks continue to rise into 1919, even as the virus continued to rage — all without the unprecedented level of aid we saw this year.

The flu also struck a population that had virtually no way to protect itself. Today, biotech firms, pharmaceutical companies, governments, nonprofits and other private companies around the world are in a race to find a vaccine or treatment, with some human clinical trials yielding promising early results as part of a fast-tracked development course. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, has even said he believes the U.S. will have 100 million doses of a vaccine by year-end. 

That progress comes as large corporations move to dramatically transform their workplaces to allow the safe return of employees and spur growth in their industries. Delta Air Lines recently announced it planned to test every employee for COVID-19 and antibodies. Norwegian Cruise Lines recently raised over $2 billion to help ensure its survival over the next year before unveiling its own plans to safely reopen to employees and passengers. Stocks among the three major cruise operators in the U.S. saw double-digit gains in the second quarter. 

To be sure, not every assessment is optimistic, and our recovery is still fraught with risks, including ones associated with the pace of our clinical trials, which could result in unsafe vaccines. But we should also remember that the markets impacted by crisis tend to recover quickly and they can sometimes see better days ahead — even when we can't.

CRN: 2020-0803-8477 R

This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at commentary-disclosures. For additional commentary or financial resources, please visit



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