Those who do not know their history are condemned to relive it, says a well-known saying. The question is whether it can also be applied to predict the development of the stock market. However, the post-war development of the main index on Wall Street suggests that historical experience can be relied upon.
US stocks lost less than a fifth of their value
American stocks have lost less than a fifth of their value so far this year, and the main index of the New York Stock Exchange, the S&P 500, has fallen by almost 20 percent. But history shows that Wall Street may be facing a trend reversal, and that stocks will begin to rally again.
Indeed, the S&P 500 has completely erased losses in three years after its value fell by 20 percent or more. And that in eight of the nine cases that have occurred since 1957. This is according to the analysis of Keith Lerner, Chief Investment Strategist at Truist.
There is talk of an economic crisis
And what is the outlook for the next six months? Historical experience shows that stocks have strengthened in six out of ten cases. But the problem may be that, after they weakened by 20 percent or more, they sank deeper in the next six months at a time when the American (as well as the global) economy was hit by the crisis. And that is being talked about more and more often today.