Good morning & happy Monday!
“There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.”
John Kenneth Galbraith, Canadian-American economist
On Monday last week (July 19th) the National Bureau of Economic Research officially reported that the Covid-19 recession officially started February 2020 and ended in April 2020 making it the shortest recession ever recorded.
Now, pardon my sarcasm, but I think they are a little late to the party 😉 This is information we all have known for a long time, but this is the official announcement from the official organization (this is what happens when you get a room full of academic bureaucrats into a room to define such terms as technical “recession” and determine exact start dates and end dates of such events).
Let’s just look at a few key dates and where the market sat at these dates:
- February 1, 2020 – beginning of the Covid-19 recession according to the National Bureau of Economic Research – S&P 500 = 3,276.24
- February 19, 2020 – S&P 500 closes at all-time high = 3,386.15
- March 23, 2020 – S&P 500 hits Covid-19 low = 2,237.40
- April 30, 2020 – official end of the Covid-19 recession according to the National Bureau of Economic Research – S&P 500 = 2,912.43
- May 29, 2020 – 100 days from the beginning of the Covid-19 market sell off – S&P 500 = 3,044.31
- August 18, 2020 – S&P 500 hits new all-time high (181 days from the previous all-time market high on February 19, 2020) = 3,389.78
- February 19, 2021 – 1 year anniversary of the pre-Covid-19 market high – S&P 500 = 3,906.71
- March 23, 2021 – 1 year anniversary of the Covid-19 market bottom – S&P 500 = 3,910.52
- July 19, 2021 – official announcement from the National Bureau of Economic Research that the recession has ended – S&P 500 = 4,258.49
Now, I’m a nerd and I love this stuff, so bear with me as we dive into just a few of these numbers and hopefully find a few valuable takeaways.
- If I invested on February 19, 2020 (S&P 500 all-time high) and sold out on March 23, 2020 (S&P 500 Covid-19 low) I would have experienced a 33.9% loss in 32 days
- If I invested on February 19, 2020 (S&P 500 all-time high) and sold out 100 days later (May 29,2020) I would have experienced a 10.1% loss
- If I invested on February 19, 2020 (S&P 500 all-time high) and sold out 181 days later (August 18, 2020) I would have experienced a 0.1% gain
- If I invested on February 19, 2020 (S&P 500 all-time high) and sold out 366 days later (May 29,2020) I would have experienced a 15.4% gain
- If I invested on February 19, 2020 (S&P 500 all-time high) and sold out 516 days later (last Monday, July 19, 2021) I would have experienced a 25.8% gain
- If I invested on March 23, 2020 (S&P 500 Covid-19 bottom) and sold out last Monday, July 19, 2021 (483 days) I would have experienced a 90.3% gain
I’ve got a spreadsheet and a calculator … I can keep going, but I’ll spare you any more data crunching 😉 Please note that all of these figures are all based on investing directly in the S&P 500 (excluding dividends and fees) and are rounded to the nearest 0.1%.
So, what’s the takeaway here?
According to the official announcement from the economic officials the Covid-19 recession has ended. If that is the point (July 19, 2021) in which an investor would have been comfortable getting back into the market (the point in which “things would have calmed down”) that investor would have missed out on 25.8% in gains in the S&P 500. And this assumes perfect timing of selling on February 19, 2020 … likelihood of which is extremely unlikely … I’ll address that next week.
We are investing for many years, often decades, sometimes even for generations … what happens over any 30-day or 100-day period of time is fairly insignificant when we take a step back and look at the bigger picture. If someone retires at 65 years old and dies at 90 they are retired for 25 years … why in the world would someone with a timeframe of decades make decisions based on what happens over say a 100-day period of time? Logically it makes no sense, but when we invest, we are all very capable of making non-logical decisions … thus the constant focus we place on goals & strategies instead of headlines & short-term performance.
Make it a blessed week ahead!