According to a previous post (#309), GDP loss in 1929 was 26%.
Various estimates already put GDP loss in 2020 at a comparable order of magnitude. Goldman Sachs says 24%, others have differing figures but nobody's saying 1% or 2%, we're looking a big number most certainly.
A particular difficulty is that when this all ends, when the lockdowns are lifted, two basic problems arise:
1. Many businesses will likely have failed given a significant period of zero income meanwhile costs continue to be unavoidably incurred.
2. A large portion of consumers have lost money either due to financial market declines, loss of paid employment or loss of business profits.
3. Governments will have truly astounding debt levels. That's going to have an impact somehow.
End result is that consumers have less money to spend and less to spend it on. There's the ongoing GDP drop which will take quite some time to recover from.
Even if someone could fly from Melbourne to London on the 1st of October 2020, there's not going to be too many people who have any interest in doing so unless the flights and accommodation are stupidly cheap. Most are going to be trying to restore their own investment balances, businesses or employment at that point, they're not going to be spending on non-essentials like major holidays indeed may workers won't have any leave available anyway.
Now consider that every other non-essential industry faces some degree of the same impact. Nobody who loses their job or sees their business run into serious difficulty decides that now's a good time to renovate the kitchen and buy a new car for example.
I have no crystal ball, I could well be wrong, but given the scale of impact it seems like this is going to take a very long time to recover from.
Take the 1991 recession for example. It might have ended in 1991 but it was still very much doom and gloom several years later in the real economy. The recession was still a major factor in politics 5 years later and it wasn't until about 1998 when there was widespread confidence once again.
The ASX spent a full decade getting back to 1987 levels and more recently it took 12 years to regain the 2007 high. For that matter the high of January 1970 wasn't reached again until September 1979 and the 1937 high wasn't regained until 1945 and the 1951 high wasn't seen again until 1958 so there's plenty of examples of the market taking close to a decade to recover.
So to the extent that anyone's pessimistic, they're really only looking at the past and noting that other such hiccups took quite some time to recover from and are assuming this one will be at least as bad given the severity of the downturn.
I do acknowledge of course that I could be completely wrong. All I'm doing here is comparing to past market tops and recessions and noting that they all took many years to resolve and assuming that this one would do much the same. That's no guarantee....