The Partners Group's Charles Dallara on market sell-off

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Charles Dallara of The Partners Group joins “Squawk on the Street” to discuss the market sell-off and the effects of the coronavirus on the economy.

Michael Kantrowitz, Cornerstone Macro, looks ahead to what could happen in the markets tomorrow.

The U.S. stock market fell into a correction Thursday as investors punished equities in favor of safer assets as anxiety over the spread and potential impact of the virulent coronavirus.

A correction is defined as a 10% decline in one of the major U.S. stock indexes, typically the S&P 500 or Dow Jones Industrial Average, from a recent 52-week high close.

Historical analysis shows these corrections result in a 13% decline and take about four months to recover to prior levels, on average.

But there’s one big caveat. This is only if it does not fall into bear market territory, down 20% from a high. If the losses stretch to 20%, then there’s more pain ahead and a longer recovery time.

Here are the numbers, according to CNBC and Goldman Sachs analysis:

There have been 26 market corrections (not including Thursday) since World War II with an average decline of 13.7% over an average of four months.

Recoveries have taken four months on average.

The most recent corrections occurred from September 2018 to December 2018. The S&P 500 bounced into and out of correction throughout the autumn of 2018 before plunging into a bear market (a 20% decline from its all-time high) on Christmas Eve.

The Dow and the S&P 500 each fell 4.4% on Thursday — the Dow lost a record 1,190.9 points — and each closed well in correction territory based on their recent record close. The S&P 500 and Dow are each down more than 10% since Monday and more than 12% each since their respective all-time intraday and closing highs hit earlier in February.

The S&P 500′s close below 3,047.53 — its current threshold for a correction — also marked the quickest 10% decline from an all-time high in the index’s history, according to Bespoke Investment Group.

There have been 12 bear markets since World War II with an average decline of 32.5% as measured on a close-to-close basis.

The most recent was October 2007 to March 2009, when the market dropped 57% and then took more than four years to recover. The S&P 500 closed in a bear market in December 2018 using intraday data.

Bear markets have lasted 14.5 months on average and have taken two years to recover on average.

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Comments

Nvrselout says:

This explains clearly why Trump’s isolationist America 1st undermines protection against global threats!

beswick1111 says:

only thing im buying now SLOWLY is PHYSICAL PLATINUM US$890/oz VERY CHEAP never been this cheap compared to gold

beswick1111 says:

being old dosent mean your smart and this fool proves it, MORE QE is the answer to this old fool, MORE DEBT to the US$23trillion yeah great idea moron, what happens when inflation ticks up? the fed will be FORCED to HIKE % rates, and with all the debt in the world, you wont get a recession youll get a GREAT DEPRESSIOn and when they do more QE to fix that, youll get a Weimar style HYPERINFLATIONARY DEPRESSION, mark my words, that's why im 70% gold and 30% cash

beswick1111 says:

MONDAY COULD BE BACK MONDAY, DOW could drop 10%+ BE WARNED PEOPLE, im 30% gold and 30% cash, im ready to buy when the DOW drops to 15,000 within a yr or 2, whats the fed going to do cut % rates to MINUS levels and do more QE, to add more debt to the system,lol

Phil Haycock says:

Nice try buddy

blah blah blah says:

These are suggestions that are blatantly designed to only push stock prices back up… That's pretty disgraceful

FlowView says:

What a joke

FlowView says:

You are saying to reward China who originate and hide the spread of the Wuhan virus ? Would you reward your house burglar by giving him your bank account access

A S says:

The fed cutting isn’t going to do anything against a virus spreading… that’s just pathetic.

Maria Elena Flores Rojo says:

These guys will say to do everything except hold China responsible for their stupid policies and idiot practices.

We are in this place BECAUSE OF CHINA!

Grant Knaver says:

This dumb… China will not participate in that war room. They own the WHO why would they?

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