Forecasting the effect of COVID-19 on the S&P500

Karina, Arias-Calluari; Fernando, Alonso-Marroquin; Morteza, Nattagh-Najafi; Michael, Harr'e

The outbreak of the novel coronavirus (COVID-19) has caused unprecedented disruptions to financial and economic markets around the globe, leading to one of the fastest U.S. stock market declines in history. However, in the past we have seen the market recover and we can expect the market to recover again, and on this basis we assume the Standard and Poor's 500 (S&P500) index will reach a minimum before rising again in the not-too-distant future. Here we present four forecast models of the S&P500 based on COVID-19 projections of deaths released on 02/04/2020 by the University of Washington and the 2-months consideration since the first confirmed case occured in USA. The decline and recovery in the index is estimated for the following three months. The forecast is a projection of a prediction with fluctuations described by $q$-gaussian distributions. Our forecast was made on the premise that: (a) The prediction is based on a deterministic trend that follows the data available since the initial outbreak of COVID-19, and (b) fluctuations derived from the S&P500 over the last 24 years.