Will this be more like 1987 than 2008?

Will there be a short recession?

Will this be more like 1987 than 2008? The S&P 500 plunged 20.5% on Black Monday, October 19, 1987 and bottomed on December 4 with a drop of 33.5%. It was a short bear market because there was no recession.

The S&P 500 peaked at a record high of 3386.15 on February 19 this year. It plunged 26.7% through Thursday, March 12. It rebounded 9.3% yesterday. So now it is down 19.9% from the top. This could be a fast bear market like 1987.

However, this time a short recession is likely. That would lead to a drop in forward earnings (unlike 1987). But perhaps the worst is over for the forward P/E. It plunged from 19.0 at the top to about 14.0 on Thursday and rebounded back to 15.2 on Friday, which is a very reasonable valuation multiple given how low is the bond yield - assuming of course that the virus pandemic will abate by midyear, as I do for now.

What do you think?

Dr. Edward Yardeni is the President of Yardeni Research, providing global investment strategy and asset allocation analyses and recommendations to many of the world's top institutional investors.