A Positive Outlook on the Market

A positive outlook on the market.

(1)

Going back to WWII, three years after a recession, we have had negative returns zero times.

Five years after a recession: All positive returns with many triple digit returns.

Ten years after a recession: All but once, the cumulative returns are triple digits.

Here’s what happened for the stock market before, during and after every recession since World War II:

Picture2This is not about where do we end in 2022. It’s about where are we three years from now? What about ten years?

 

(2)

Over 10-year periods, around 75% of the time stocks out-perform T-bills since 1802.

Over 30-year periods, the odds increase to over 90% of the time.

Since 1871, over 30-years, stocks out-performed Tbills for all rolling periods.


(3)

If you invested in a hypothetical S&P500 fund 20 years ago and missed the first 10 days of each market rebound, you would've forfeited more than half your gains vs. just holding. This is why staying invested during down and volatile markets is important.

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(4)

On average, just one year after a market decline of 10%, stocks rebounded 12.5%. One year after 20% and 30% declines, the cumulative returns topped 20%. Five years after market declines of 10%, 20%, and 30%, the average cumulative returns all top 50%.

The data makes a case for sticking with a plan. Strong rebounds after steep declines can help investors capture the long-term benefits that the markets offer.

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(5)

All the bear and near bear markets since 1950.
Notice the last column - how many months each lasted.

The average duration from peak to trough is 11 months.

The median duration is 7.2 months.

At this writing (7-19-22), we are at about 6.5 months.

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(6)

With that being said, bear market lengths can be painful if it is a significantly bad one.

For the five longest bear markets in US stocks since WWII:

The Peak to Trough average is 18 months.

The Breakeven from the Bottom average is another 37 months.

That’s a total of a 55-month average peak to trough back to prior peak.

Having a plan in place and sticking with it can help reduce the perceived pain. Keep your eye on the long term.

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Past performance is no guarantee of future results.

 

1 https://thereformedbroker.com/2022/07/13/a-mild-recession/

2 https://twitter.com/jeremydschwartz/status/1545772192021069829?s=11&t=g9C9IcUI4dy3JGrCerl3HQ

3 https://www.linkedin.com/posts/john-c-wahl-cfp%C2%AE-chfc%C2%AE-42b271b5_if-you-invested-in-a-hypothetical-sp500-activity-6937765420200312832--Lxq?utm_source=linkedin_share&utm_medium=member_desktop_web

4 https://www.linkedin.com/posts/john-c-wahl-cfp%C2%AE-chfc%C2%AE-42b271b5_on-average-just-one-year-after-a-market-activity-6943209511679668224-G_Yi?utm_source=linkedin_share&utm_medium=member_desktop_web

5 https://www.linkedin.com/posts/john-c-wahl-cfp%C2%AE-chfc%C2%AE-42b271b5_all-the-bear-and-near-bear-markets-since-activity-6942543483698130944-RqKl?utm_source=linkedin_share&utm_medium=member_desktop_web

6 https://awealthofcommonsense.com/2022/07/investing-in-a-bear-market/