If this really was a return to the Great Depression of the 1930s, stock markets would have suffered a much bigger reaction
Just as things are never quite as good as they seem during a boom, nor are they generally as bad as they appear in the depths of a crisis. We therefore need to be a little bit careful with blood curdling warnings of a second Great Depression to come; if this were a real possibility, stock markets would have crashed far more than they have.
In fact, the FTSE All Share index is today no lower than it was four years ago, and, despite its ups and downs since, the S&P 500 is not much changed even on as little as a year ago. Markets often get it wrong, but if investors believed there was a significant risk of today’s social distancing measures transmogrifying into a Thirties style economic catastrophe, you’d see a much more acute reaction.
Despite the gathering wave of dividend cuts, and the manifest shakeout occurring in the most directly affected sectors, in aggregate share prices are holding up remarkably well. That’s partly down to the macroeconomic response, which has been rapid and on the whole well judged; we can argue about implementation at the micro level. The fact that this is a Government imposed downturn, rather than the result of excesses in the financial and business cycle, also makes it significantly different from past contractions, even unique.