The actions were slammed. Here's what history suggests what happens next

History shows that this type of recovery is expected.

In the week after falling 10% or more, the S&P 500 registered an average increase of 3.5%, according to Bespoke Investment Group. The index was positive 80% of the time, with the two exceptions that occurred in 1929 and 1940, at the beginning and the end of the Great Depression.

Yields are somewhat more mixed in the long term, however.

Bespoke found that three months after a weekly fall of 10%, the S&P 500 posted an average gain of 5.6%. However, the median gain was only 1.1%. And the broad index actually fell more often (53%) than it did up (47%).

For example, the last time the S&P 500 suffered such a fierce sale was in 2008, at the height of the financial crisis. L & # 39; s index fell 18% the week ended October 10, 2008 as panic takes over Wall Street and Congress approves a $ 700 billion bank bailout.

Markets jumped 4.6% the following week in 2008, but the recovery turned out to be short lived as the crisis deepened. The index was down three and six months later and would not bottom out until March 2009.

The greatest risk to the global economy since 2009

The resumption of the current period of turmoil will be dictated by the economic damage caused by the coronavirus epidemic and the ability of policymakers to appease nervous investors.

"It is still a little too early for us to call for clarity," said Rob Haworth, senior investment strategist at US Bank Wealth Management.

Haworth said he needed more clarity on the number of coronavirus infections and deaths – as well as the consequences for the economy.

"We don't think we're there yet," said Haworth.

Last week's sale was prompted by fears that the coronavirus epidemic would plummet corporate profits and trigger a slowdown or even a recession in the United States. Apple (AAPL), Microsoft (MSFT), Coca Cola (KO) warned of supply chain disruptions caused by the health crisis in China. MasterCard (MY), United airlines (UAL) and Pay Pal (PYPL) clouded their prospects due to demand concerns.

The coronavirus poses the greatest risk to the global economy since 2009 and could cut growth in half if the epidemic continues to spread, according to the Organization for Economic Cooperation.

"The virus correction could easily approach bear market territory in the next few days given the fear pandemic," Ed Yardeni, chairman of investment advisory Yardeni Research, wrote on Monday. Yardeni said that rather than replaying the long financial crisis of 2008 and 2009, the sale could be relatively brief.

Falling rates to come?

The good news for investors is that central bankers are taking the crisis seriously. Although the rate cuts will not stop the coronavirus, it could stabilize the financial markets.

Federal Reserve Chairman Jerome Powell on Friday released a rare statement acknowledging that the coronavirus poses "evolutionary risks" to the US economy and promising that the US central bank "will do the right thing" to support growth .

Goldman Sachs and Bank of America are now asking the Fed to cut interest rates by half a percentage point at the March meeting, or even earlier as part of an action # 39; emergency.

Goldman Sachs released a report on Sunday saying the U.S. economy is likely to avoid a recession, although GDP slows to 0.9% in the first quarter and to zero in the second quarter before rebounding.

"The stock market will recover once investors understand that the worst is over for the global health crisis and that profits will start to grow with the global economy," said Yardeni. "We think it could happen by the middle of the year."

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