We provide a data-driven analysis of how investor expectations about economic growth and stock market returns changed during the February-March 2020 stock market crash induced by the COVID-19 pandemic. We surveyed wealthy retail investors who are clients of Vanguard in mid-February 2020, around the all-time stock market high, and then again on March 11 and 12, after the stock market had collapsed by over 20%. The average investor turned more pessimistic about the short-run performance of both stock markets and the economy. Investors also perceived higher probability of both further extreme stock market declines and large declines in short-run real economic activity. In contrast, investors' expectations about the long run remained largely unchanged, and if anything improved. Disagreement among investors about economic and stock market outcomes also increased substantially. Our analysis is an input in both the design of the ongoing economic policy response and in further advancing economic theories.
Inside the Mind of a Stock Market Crash