Looking Past the COVID-19 Economy: A Historical Look at Previous Economic Bumps and Recoveries


There’s been a lot of discussion about COVID-19’s far-reaching economic effects over the past month and a half. Beyond the initial economic slump, many people have been focused on recovery; specifically how – and if – we can recover.

Can a world simply press pause on the global economy for over a month? How does one do business from inside their home? Will the stock market ever reach the same peaks as before COVID-19? These questions are far too complex to answer, however looking at prior examples of economic difficulties and subsequent growth can give us some insights.

Precedent shows us the economy will likely recover. A look back on the most impactful economic events in recent history may provide insight as to how we can expect the US Economy to recover after COVID-19.


2008 Housing Crisis

It’s been just over a decade since the last major economic downturn in US history. The 2008 Recession was known as one of the most devastating events in recent financial history; an event largely attributed to the rise in irresponsible subprime mortgage loans, reckless lending, and growing consumer debt. The crisis greatly damaged the finances of many Americans. Countless workers were laid off, forced to take pay cuts, or watched retirement plans dwindle to nominal values. Other young employees were denied entry to the job market altogether. The overall economic fallout was estimated in the trillions.

As part of the nation’s recovery, the federal government spent nearly $700 billion dollars to bail out banks. Citizens received aid through the Recovery and Investment Act of 2009. 10 years after the crash, the Washington Post ran an article detailing how the economy had changed from the crash and it’s long term impacts. The piece did not deny that economic infrastructures came out unscathed, but it did report the US economy as largely recovered based on a record long stock market upswing, rebounded home prices, a changed housing market, lower unemployment rates, and a generally safer financial system than before the crash.

Comparing the 2008 Crash to the COVID-19 Economy

Overall, the 2008 Housing Crisis and the COVID-19 pandemic follow very different economic patterns, one much more severe than the other.

The timelines for the 2008 Housing Crisis and COVID-19 are significantly different. Economists pin the origins of the 2008 Housing Crisis as beginning in 1999. It was around this time that banks began giving subprime loans, which continued to grow in popularity until the market could not sustain lending. In just under 10 years, the housing market bubble popped, ushering in an extended period of Recession.

Our most recent downturn followed no such buildup. The virus invaded our global society in just a few months with a cataclysmic effect. The timeline of COVID-19 was much more rapid than the Housing Bubble’s timeline, signifying that recovery could come more quickly as well.

After the initial crash, the trajectory of economic recovery following the 2008 crisis follows a steady dip and correspondingly long, tedious recession. But America still recovered from the Great Recession. Comparatively, the COVID-19 pandemic began in late 2019. The most substantial dip hit in March, when the virus reached the States. Now, just a couple of months later, businesses are finding new ways to make use of digital infrastructures, adjusted policies, and new models to continue propelling economic activity. Government stimulus packages were passed in just a few weeks. The future is still uncertain, but with American businesses adapting and new industries growing, perhaps there are still opportunities for growth.

In time, America recovered from the unprecedented Great Recession. In time, we can hope for an economy recovered from the unprecedented COVID-19 pandemic as well.


Black Monday, 1987

Black Monday has been used in reference to more than one historically bad day marked by significant crashes. But the 1987 Black Monday is particularly notable in that the cause of the crash still remains a bit of a mystery.

On October 19, 1987, the stock market suffered the biggest percentage drop to ever occur in just one day. The Dow Jones Industrial Average fell a whopping 22%, setting off a global stock market decline. There were no definite reasons for the 1987 market crash, no corresponding natural disasters or acts of God, and no major political scandals. Black Monday is largely attributed to mass panic buying and selling prompted by an atmosphere of speculated market insecurity.

At the time, global politics were changing in the Middle East, threatening the oil supply chain. The US continued to widen its trade deficit, threatening local industries. Technology was beginning to change everyday life, and computerized trading systems disrupted normal operations. One theory is that media coverage of these events contributed to a sense of market panic. Regardless of fault, the simultaneous events of the time caused a perception of instability, prompting traders to act.

The market luckily rebounded quickly from such a drastic drop, regaining all the value it had lost by September of 1989. Since then, the SEC implemented policies and procedures to stop mass panic buying in an effort to prevent future panic crashes.

Comparing Black Monday to the COVID-19 Economy

The closest similarity between COVID and Black Monday would be a shared sentiment of panic. However, panic over disease and panic over unspecified, unsubstantiated events are two very different behavioral responses.

One cannot say a single event caused Black Monday in 1987. While COVID-19 began as a medical mystery, the disease was the definite cause of the recent economic decline. Knowing what caused the crash can help economists and the market recover faster. Just as the economy recovered from Black Monday relatively quickly, we believe we may expect the market to recover from COVID-19 with a similar trajectory. In a recent CBS News feature, Morgan Stanley analysts predicted a V-shaped recession with a deep depression but quick recovery. Their predictions show slow growth this year, followed by a surge of recovery.


Stock Market Crash of 1929

Perhaps the most notable stock market crash, the crash of 1929, set off one of the most severe economic declines, known as the Great Depression. Prices plummeted 13% on the New York Stock Exchange. This was followed by “Black Tuesday,” which was characterized by another 12% fall just the following day.

Before the crash, the economy had flourished significantly during the “Roaring Twenties,” leading to overconfidence in the market. Investors quickly began haphazardly buying and selling stocks which ultimately worsened the impacts of the crash. The Dow lost 89% of its value, unemployment numbers soared, and the country was thrown into a decade of economic hardship, the Great Depression.

The economy did not recover for years. Government stimulus played a major role in lifting the nation out of the Great Depression. Roosevelt’s New Deal began in 1933, however, the economy did not fully recover until 1954 when the Dow finally regained much of its value prior to the crash.

Comparing the 1929 Stock Market Crash to the COVID Economy

The 1929 stock market crash, like the 2008 Housing Crisis, occurred at the end of an extended stretch of an economy dominated by overly optimistic consumer spending. Unlike COVID-19, this economic crash did not occur within a short period of time. The trajectory of decline and recovery followed a much slower pattern than the projected recovery of a post COVID-19 economy after its rapid onset.

Government stimulus and legislation was passed to aid in recovery, but it took the country four years to develop and pass the economically supportive legislation. In contrast, in 2020, the government began developing supportive legislation almost immediately after the initial economic shock. Stimulus packages were passed in a matter of weeks, not years. We believe that if the economy could recover from a depression as severe as the Great Depression, it may recover from the economic effects of COVID-19 as well.


The 1918 Spanish Flu Pandemic

One of the last major pandemics occurred in 1918. The H1N1 strain of influenza, termed the Spanish Flu, killed between 20-40 million people worldwide. There was no known vaccine. Much like today, people were asked to wear masks, local businesses were forced to close their doors for extended periods of time, and it was recommended that people stay away from others.

At the time of the 1918 outbreak, the American economy was already in flux because of the recent World War. Infections spread as soldiers came home from Europe, bringing the virus to their hometowns and through busy hubs of transportation.

The Spanish Flu has not necessarily been associated with an economic impact historically. But as the pandemic took hold in America, many local businesses suffered from adjusted hours, limitations on services offered, and forced changes to the normal way of life. Local economies and business owners certainly felt the effects of a pandemic economy. A report on the Spanish Flu of 1918 from the Federal Reserve Bank of St. Louis analyzed the economic impact of the disease on the American economy by reviewing reports from local newspapers about the impacts on communities and their businesses. The Arkansas Gazette, for example, reported that “…merchants in Little Rock say their business has declined 40 percent. Others estimate the decrease at 70 percent.” The headline could be pulled from one of today’s publications. But despite the hurt local economies, like Little Rock, felt after the disease hit, the report’s findings did not indicate that the effects were long term on the national economy.

Comparing the 1918 Spanish Flu Economy to the COVID Economy

We believe the 1918 Flu pandemic’s economy may be a good model to use to predict economic recovery from COVID-19. However, even the Spanish Flu example isn’t a perfect model to predict our current recovery due to our modern world’s available technologies, a different global economic infrastructure, and faster progressions in medicine and innovation.

Through history alone, we know that just a few years after the 1918 pandemic America welcomed one of its most prosperous and consumer-focused decades. While the late 1920s brought its own economic crisis, it serves as evidence that the market did not stagnate significantly because of the Spanish Flu pandemic, only that consumers’ money should have been spent more wisely. With modern technology, quickly moving legislation, and hindsight to help us make better decisions, economic recovery from the COVID-19 pandemic may come even more quickly than recovery from the Spanish Flu.

History has shown that the American economy is resilient, through collapses in infrastructure, outbreaks of disease, and other forms of economic and cultural instability. We can hope for an equally strong economic recovery from COVID-19. Of course, it will be a game of patience, and businesses will continue to face the challenge of safely navigating the upcoming months.


Epidemiologists are still unsure about additional waves of the virus and the secondary effects it may have on civilians. There is no assurance that social activities like sporting events, restaurants, concerts, and close contact services will return to pre-COVID procedures in the near future. But as history has shown us, innovation, adaptability, and an entrepreneurial spirit will lead to a flourishing economy once again. However fast or slow it may be, there will be a light at the end of the tunnel.

We understand this is still a difficult time, and we are here to help. If you have any additional questions about the current crisis and how this will affect your finances, please do not hesitate to reach out to us.


The opinions expressed herein are those of Morris Financial Concepts, Inc. (“MFC”) and are subject to change without notice. This material is for informational purposes only and should not be considered investment advice. Nothing contained herein is an offer to buy or sell a particular security. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future results. Historical returns, market conditions based on historical events, and probability projections are provided for informational and illustrative purposes nad may not reflect actual future performance. MFC relies on information from various sources believed to be reliable, including third parties, but cannot guarantee the accuracy and completeness of any third-party information. MFC is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about MFC including our investment strategies, fees and objectives can be found in our ADV Part 2, which is available upon request.