Past crises, Dow Jones Industrial Average (DJI) and a look into the crystal ball

Lessons

• Crises last for many months, some even for years.
• So far, the stock exchanges have always recovered.
• The recovery also takes many months, often years.

Glance into the glass ball / Covid-19

• We have probably not yet reached the low - Corona will remain for many weeks and months.
• Base case DJI: 14,000 points
• Worst case DJI: 7,000 points
• Best case DJI: 20,000 points
• After the low, a recovery will take many months or years.

1973 oil crisis

January 1973 peak of 1,060 points in the Dow Jones Industrial Average (DJI)

Two years of descent to 590 points in December 1974.

This corresponds to a loss of 40%.

Back to 1,000 points within 1.5 years and almost completely recovered.

2000 Dotcom bubble and 9/11

The dotcom bubble reached its peak in the DJI in December 1999 with a high of 11,500 points.

Together with the attack of September 11, 2001 on the New York World Trade Center towers, one can speak of a descent of about 3 years.

During this time the DJI lost almost 3,900 points or 35%.

From 9/11, the DJI recovered in two years. A complete recovery to the level of the dotcom bubble lasted 3.5 years.

2007 credit bubble & Lehman bankruptcy

Before the bubble burst, the DJI peaked at 13,900 points in September 2007.

The DJI hit a low of 7,000 points in February 2009. In about a year and a half, the DJI lost almost half of its value.

The DJI had to recover from this for four years in order to reach the old high again in January 2013.