The Coronavirus pandemic continues to sweep the globe, investors are worried about economic performance in the near-term, and the stock market is responding accordingly.<\/p>\n
The last week has seen two of the worst days for US stocks since the Great Depression. On March 12 the S&P 500 Index fell by 9.5%, and on March 16 it fell by 12.0%. The benchmark index is now down 29% for the year to date. We are firmly in a \u201cbear market\u201d.<\/p>\n
Bear markets are periods when the stock market declines by 20% or more from the most recent high. Using the S&P 500 Index as a yardstick, there have been 16 bear markets since 1926, averaging one every six years. On average they last a bit less than two years, and the market\u2019s \u201cpeak to trough\u201d decline is about 40%.<\/p>\n
Despite these psychologically painful bear markets, the stock market has historically always been up more than it\u2019s been down. Over the 70 years from 1950 through 2019, the S&P 500 Index was up about 54% of trading days and down 46% of trading days, and the percentage of positive days exceeded negative days in every decade.<\/p>\n
<\/p>\n It may well be that we haven\u2019t seen the bottom of this bear market. After all, it\u2019s now widely acknowledged that the US has been too slow and graduated in its response to the fast-spreading COVID-19 virus. So, the market will likely remain volatile for a while, and further declines are not out of the question.<\/p>\n But let\u2019s compare this current bear market to some others:<\/p>\n <\/p>\n Investors who sold at or near the bottom during these periodic corrections suffered significant losses. For those who stayed the course and experienced the subsequent recovery, the experience was probably no less painful psychologically, but the financial result was much different.<\/p>\n When you\u2019re going through a bear market, the challenge is to remain focused on your long-term objectives.<\/p>\n <\/p>\n Bear markets are often followed by bull markets. For example, the 2007-09 Great Recession was followed by the longest bull market in history, which only came to an end with this Coronavirus outbreak.<\/p>\n There have been 14 bull markets \u2013 defined as an increase in stock prices of at least 20% \u2013 since 1930. While bull markets typically last for several years, it\u2019s not unusual for the bulk of the gains to occur during the first few months of the recovery.<\/p>\n For example, after the S&P 500 Index hit its bottom in early March 2009, it gained nearly 9% for the full month of March and an additional 10% in April. Riskier small company stocks rebounded even more strongly, rising 9% for March and over 15% in April.<\/p>\n If you\u2019re an investor wondering whether it might be wise to flee to the perceived safety of cash during a painful market downturn, you should keep in mind the very real cost of missing out on the early stages of the inevitable market recovery.<\/p>\n We take our fiduciary role as your financial advisor very seriously, and remain committed to helping you successfully navigate the investing seas, calm or stormy.<\/p>\nThis Time Isn\u2019t Different<\/strong><\/h2>\n
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The Importance of Staying Invested<\/strong><\/h2>\n
How the Market Recovers<\/strong><\/h2>\n