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Investors quickly realized their worst fears may be coming to fruition last Thursday as the Dow plunged 10%.
It was the worst day since Black Monday in 1987. And it has investors around the world comparing the situation to the last bear market, following the 2008 stock market crash.
The coronavirus crisis is a "black swan" event that could put the United States into another recession… and possibly even another depression.
As the number of confirmed coronavirus cases around the globe swelled, it sent investors scrambling for the exit doors.
Nothing is safe during "global risk-off" events. During extreme times of panic, cash is king.
Not even gold (down 3.5% yesterday) was safe. You see, gold typically decouples and becomes inversely correlated during periods of stress. Historically, it's a great long-term hedge, but in times like this, it can drop significantly in the short term too.
For perspective, take a look at what happened from the market tops in October 2007 to the depths of March 2009. In that time, the S&P 500 dropped like a rock – down 56.1%.
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So, what happens to stocks over the next 18 months is the big question on investors' minds.
Are we in the early stages of another recession?
This chart might have the answer…
This Chart Proves We Could Be at the Beginning of Another Recession
The chart below details what happened from 2005 to 2010. And we can use it to draw parallels to today and figure out where things could be headed going forward…
On March 3, 2020, the U.S. Federal Reserve met to slash interest rate by 0.50%. This was an emergency reaction to markets as they initially began falling.