Good morning, happy Monday, and happy Easter!
“You get recession, you have stock market declines. If you don’t understand that’s going to happen, then you’re not going to do well in the markets.”
– Peter Lynch, legendary investor
I5 years ago this month was a very important event in the history of the stock market … it was the bottom of what is now commonly referred to as the Great Recession correction of 2008-2009. This was the greatest recession / stock market correction of our lifetimes (you would have to go back to the 1939 stock market crash of the Great Depression for a greater pullback).
Leading up to this correction we saw the S&P 500 traded as high as 1,552.87 on October 9, 2007.
Then by March 9, 2008, the S&P closed at 676.53 after suffering a 56.4% drop from its previous all-time high.
My friends, Friday the S&P 500 closed at 5,234.18!
That’s 337% higher than its 2007 all-time high and 773% higher than its 2008 low! And this does not even include dividends!
In hindsight, 15 years ago presented an incredible buying opportunity, but that was not the mindset of most investors at the time.
Let’s rewind the clock back to that timeframe.
A handful of banks collapsed, including my former employer Wachovia Bank, with the FDIC stepping in with massive bank bailouts. The auto industry received a controversial government-backed bailout. Housing prices collapsed. Unemployment spiked. Government spending ballooned. Portfolios plummeted. Fear ran rampant. It was a scarry time.
That’s what bear markets usually look like … fear everywhere.
In the stock market, sellers are active, and buyers are scarce.
What is your perspective at these times?
The media, and likely your friends and neighbors, seemed to all be yelling in unison some type of apoplectic message … “the world as we know it is crashing and we will never recover.” It’s hard to be anything but fearful at times like this. Even if you were an optimist, these were dark days.
But the reality is, that was the buying opportunity of a lifetime.
Now, I don’t send this message to rub it in or to shame any of us. Heck, I was 29 years old at the time and did not have a tremendous amount of financial resources to take advantage of the buying opportunity myself. But there were such tremendous learning opportunities this presented.
So, what are the lessons this should teach us?
- Don’t make emotionally based decisions when it comes to your investment portfolio. Emotions are running super high during such stressful times; it is important to keep your head and don’t give in to those emotions. This is hard … helping to manage emotions one of my most important responsibilities as your financial planner.
- Bad times will come, and they will go … be patient! If you own 100 shares of a company at $100/share you still own 100 shares of the company at $75/share. Sure, the temporary value of the company has decreased, but your ownership stake has not decreased at all. History can teach us no other lesson than investing patience pays off.
- Buying opportunities abound in such times. If you have additional money that can be deployed, you would have been wildly rewarded for adding money to your investments in this time frame. Next time a pullback happens, which nobody knows when, be prepared to increase your investments if you can … the stock market goes on sale occasionally, shop the sale 😊
Since this 2008-2009 “Great Recession” there have been two additional market corrections: Covid-19 drop from February-March 2020 and the most recent pullback from January 2022-October 2023. Same lessons from above applied to these corrections.
No matter when the next market pullback occurs, or what causes it, the lessons above will still be wise counsel. Implement the lessons learned. History can teach us nothing different.
As long-term, disciplined, patient investors we not only survive during market downturns … we thrive!
It is an incredible honor to be a part of your journey. Thank you for trusting us with your treasured financial future.
Make it a great week ahead! Hope you have a blessed Easter!