Financial Decisions Ahead?
It’s now less than a month away from the presidential election and regardless of the outcome, there is no question that the markets will react one way or the other. That being said, now might be a good time to look at rebalancing your portfolio, especially if it’s primarily in the stock market. There are several reasons why many of us who have been paying close attention to the financial markets believe the stock market is extremely volatile.
If you look historically at the previous market down turns whether it was one of the 16 bear markets or the 4 crashes that occurred since the Great Depression, it’s important to pay attention to the amount of time it took the market to return to the same level it was from the beginning date of its highest point before it took a dive downward. This is referred to by most analysts as the recovery period. (It’s also important to note that many financial companies who sell stock products refer to the recovery period as the point where the market is at its all time low and begins its trend back upward. This can be a much shorter timeline depending on how long it took to reach the bottom.) Here’s a brief historical description and summary of the downturns mentioned above:
Bear markets are periods when the stock market declines by 20% or more from a recent peak. Using the S&P 500 Index as a measure, there have been 16 bear markets since 1926, averaging once every six years. They last an average of 22 months, and the market loses an average of 39%.
Below are the four market crash recovery periods that have occurred since the Great Depression (these are approximate based on the different indexes used to measure the market):
1929 – The Wall Street Crash that led to the Great Depression – 25 years
1987 – Black Monday – 5 years
2000 – The Dotcom Bubble Burst – 8 years
2008 – The Global Financial Crisis – 4 years
The reason this is the important information to look at is because it took only 6 months for both the Dow Jones and S&P 500 climb back up to where it peaked prior to the Covid-19 downturn of 9763 points. That’s a 33% drop in one month!
Below is the market summary since Jan 1, 2020: