Dow Jones Industrial Average and its Path to Recovery

The U.S. stock market is back on track. However, this does not mean that everything is fine, as the road to recovery can be treacherous due to various factors. Last week, the Dow Jones Industrial Average rose 12.8%. It was the biggest weekly percentage gain since 1938. Moreover, another major U.S. stock index S&P 500 reached its best three-day return since 1933.

Furthermore, this week U.S. stocks also strengthened their positions. For example, on Monday the S&P 500 index gained 3.4%. It is worth mentioning that, at the moment it is less than 3% away from the 20% threshold needed to declare bear market over.

Nevertheless, people should take into account that the bottom of this cycle won’t truly come until there is enough evidence to say that the pandemic is under control. Another important indicator is the state of the U.S. economy.

Several factors such as the decision of White House and lawmakers regarding the $2 trillion stimulus package helped to boost the stock market. It is the biggest stimulus package in U.S. history.

Dow Jones Industrial Average and main challenges

However, it is too early to say the U.S. stock market recovered as it will take time before the market will be able to overcome this period.

It is important to mention that, usually it takes a lot of time for stocks to recover from severe losses. Moreover, bear markets are measured in months, not days. For example, the median bear market lasted for 17 months according to Goldman Sachs.

However, there were 23 trading days between the S&P 500 record high in February and the recent low. Interestingly, even the shortest bear market lasted at least three months.

As can be seen from the examples mentioned above, despite recent gains it is too early to say that the bear market is over. However, the Dow Jones Industrial Average staged an impressive comeback and this is good news for the stock market.