Markets in historical perspective
Real estate values decline. The market has its largest one-day loss ever. Credit dries up. Government bailout enacted. Sound familiar? It should, because we also saw a similar situation from 1987 to 1991. Today's market troubles are remarkably similar to others that have occurred in the past, which provides hope that the recovery will be similar as well.
We've been here before
Periodic crises in the market are nothing new. While this may not make the current turbulence less painful, it can be cause for optimism over the long term. For example, the Dow Jones Industrial Average has declined periodically over the last 80 years while still maintaining its long-term upward trend. While there may be bumps along the way, the market historically has trended higher — a reassuring thing to remember after the market has a bad day or week.
Overcoming crises
Negative events have sent the stock markets down over a short period of time in many instances in the past. Over 20 such events, the market declined, on average, 11.2%. However, just one year later, on average, stocks regained 16.2%. Only in rare situations did the market take longer than a year to recover from its setback.
Chart source: Copyright© Thechartstore.com
Chart source: Ned David Research
Past performance is not a guarantee of future results. The Dow Jones Industrial Average is an unmanaged index that follows the returns of 30 well-established American companies, and is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in the market prices, but excludes brokerage commissions and other fees. It is not possible to invest directly in an index.
