The 11-year bull market, which grew in tandem with one of the longest economic expansions in United States history, weathered a European debt crisis and survived President Trump’s trade war with China, is dead — a casualty of the global coronavirus pandemic.
On Wednesday, the Dow Jones industrial average fell 5.9 percent, completing a decline of 20.3 percent from a high reached on Feb. 12 and signaling a bear market. That threshold — a fall of 20 percent from a high — suggests a fundamental change in the way investors now think about the outlook for the economy and corporate profits.
The S&P 500 closed down 4.9 percent on Wednesday, at 19 percent below its recent high, meaning it, too, is veering toward bear country.
The steep fall of both the Dow and S&P indicates that market has now entered a realm where prices for stocks tend to fall rather than to rise.
For weeks, as the coronavirus outbreak spread swiftly across the globe, infecting tens of thousands of people and killing thousands, hitting more than 100 countries, the market has careened downward — despite occasionally reversing course on bits of promising news — as investors have struggled to understand the disease’s impact on financial markets and the global economy.
Shares nose-dived again on Wednesday after the World Health Organization declared that the outbreak had reached “pandemic” status — which the organization defined in 2010 as “the worldwide spread of a new disease.”
The drop in the 30-stock Dow index was led by an 18 percent collapse in Boeing, after the aerospace and defense giant announced new efforts to preserve cash in the face of a global slide in air travel and the fallout from its troubled 737 Max plane. The high dollar value of Boeing shares makes it one of the most influential stocks in the Dow, which is a price-weighted index.
Falling share prices have incinerated $5 trillion in stock market wealth in less than a month. Few other periods in history compare to the speed of this bull market’s demise from its recent record, reached just weeks before.
The descent into bear territory is a significant moment for markets, which often operate as something of an experiment in mass psychology. Although investors are unlikely to immediately change their buying and selling strategies after Wednesday, the 20 percent marker — arbitrary, but widely agreed upon — carries symbolic value. Bear markets can also herald economic recessions — including the 1929 stock market crash that preceded the Great Depression, or the last bear market that began in 2007 as the United States economy plunged into a financial crisis.
The bull market that just died had its origin in March 2009, and during its run the S&P 500 rose over 300 percent. It lasted about twice as long as the average bull run. (The gains were 400 percent, if you included dividend payments.) Since the bull market for the Dow began, it is up more than 250 percent.
The performance of the S&P and the Dow together provides a capsule history of the American economy since it emerged from the recession that set in after a foreclosure crisis, a panic on Wall Street and a rash of bank failures beginning in 2007.
In the past decade or so, the United States experienced an economic expansion with few parallels in history, as the unemployment rate fell and low interest rates fueled consumer spending, including for major purchases like houses and cars. Consumer spending has long been the engine of the American economy, a driving force that has helped lift markets through rough patches, geopolitical crises and a trade war with China.
But despite those gains, the long climb for the stock market was a steady simmer that never quite reached a boil. The 13 percent annual pace of gains was far less than during similar periods of the 1980s and 1990s that generated mass enthusiasm for ownership of stocks.
In the end, the bull market was felled by a virus. That’s because an outbreak of disease such as the coronavirus presents a more complicated problem that cannot easily be fixed by monetary or fiscal policy, such as interest-rate and tax cuts. The outbreak’s twin disruptions — snapping global supply chains and suppressing consumer demand — are leading to unprecedented challenges for governments scrambling to contain a disease while also steadying the economy.