The Market Grapples With Fear and the Timing of a Recovery

At this point, much bad news is priced into stocks, he said, including a 35 percent drop in dividend payments. He anticipates a 30 percent decline in earnings per share, which he called “bad, but not catastrophic.”

Analysts have been sprinting to slash their forecasts for economic and corporate performance. Leading indicators tracked by the Organization for Economic Cooperation and Development recorded “the largest drop on record in most major economies” in March, the group said.

Investment banks have continually revised their predictions for declines in second-quarter economic output, with those of Goldman Sachs and Morgan Stanley approaching a 40 percent annual rate. As for earnings, FactSet Research foresees the companies in the S&P 500 collectively experiencing a 21.7 percent decline in the second quarter, compared to the same quarter of 2019. Its full-year forecast is for a 9 percent decline.

Bear markets often unfold slowly because investors are unsure whether a recession is approaching. James Paulsen, chief investment strategist at the Leuthold Group, argues that there is no such uncertainty now — so it’s possible that the selling that typically occurs has already happened in this one.

Kristina Hooper, chief global market strategist at Invesco, highlighted two aspects of the crisis with opposite potential impacts that she says have yet to be fully factored into share prices.

“There’s a potential for slightly lower infection rates than had been expected,” she said, a development that was starting to be realized and could help account for the recovery since late March. But, she said, Wall Street has been expecting a sequel to the $2 trillion appropriation, and none has been announced. The absence of one “could be disastrous” for an economic recovery, she warned.

Theories on where to invest

Like Mr. Hyman and Mr. Benkendorf, Ms. Hooper encouraged investors to maintain the same mix of assets they aim for in more placid times. As for tactical moves, she would add exposure to Asian emerging markets, including China.