One measure of market stress is mirroring its 2008 moves — and calls for a 2nd dip before recovery

• Market conditions are mimicking their 2008 trendline, according to Bloomberg's US Financial Conditions Index.
• The metric measures stress across the US stock, bond, and money markets.
• The index dropped from mid-February to late-March amid the coronavirus sell-off before retracing half of the plunge in April.
• The move is nearly identical to its financial crisis trajectory, and history suggests markets will slide for one more month before posting a return to past highs, Bloomberg reported.
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The current economic downturn and the financial crisis were fueled by completely different events, yet Bloomberg's US Financial Conditions Index suggests markets are repeating their 2008 trend and are poised to fall again.

The metric, which measures stress in the US stock, bond, and money markets, plummeted from mid-February to late-March before retracing half of its decline in April, Bloomberg reported. The move is almost an exact copy of what happened in 2008, when the index slid through September to recover half of its losses the following month.

Though the two recession events have little in common, the similar trendline suggests markets will slide for one month before returning to pre-virus highs. The foreboding signal arrives as several states begin to reopen businesses for the first time in nearly two months. Though some economists have called for such revivals to avoid a deeper-than-necessary recession, others fear a premature reboot can spur a second wave of coronavirus cases and drag markets lower.

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The bearish sentiment is shared among some of Wall Street's biggest players. The US economy will take four years to fully rebound from its virus-slammed state, Scott Minerd, chief investment officer at Guggenheim Investments, said in a Sunday note. Rolling lockdowns will remain until 2022, he added, citing a Harvard study, keeping profits below their February highs for years to come.

DoubleLine CEO Jeff Gundlach told CNBC on Monday he reopened a short position on the S&P 500, saying the trillions of dollars in economic relief measures aren't enough to keep the index at its current levels.

"I'm certainly in the camp that we are not out of the woods. I think a retest of the low is very plausible," Gundlach said. "I think we'd take out the low."

Other investors view the Federal Reserve's historic intervention as a sturdy backstop for risky markets. Lending facilities for corporations, municipalities, and small businesses lifted credit stresses early in the outbreak's timeline. Several grades of debt have since rallied on the news, and stocks have enjoyed indirect support from the central bank's unprecedented efforts.

Bank of America analysts advised clients on Thursday to "buy what the Fed buys," adding distressed debt "has to trade higher before rally ends."

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