How have you done? Are your accounts recovering or still quivering? Economic recessions are painful events for everyone. While the unemployment rate has risen dramatically and this is impacting many families in our area and across the country, those that are still employed are also impacted. Recessions are often the catalysts for companies to streamline their operations, bring expenses back into alignment with revenues, and increase profitability. Accomplishing these outcomes though often include pain for employees and investors alike.
According to the National Bureau of Economic Research, the investments markets generally recover a significant amount in the six and twelve month periods following the recession lows. This recession tossed just about everything at the investing public. Based on the S&P 500®, the index hit a low on November 20, 2008, of 752.44. Unfortunately, not all of the pain has been distributed and while the markets rallied from this low until early January 2009, this was more of a setup for the next low which occurred on March 9, 2009 when the index reached 682.55. From the peak in October 2007 of 1,565.15, these low points clearly represent a significant decline in value.
From the March low, the markets will have to recover 129 percent to reach its past high value. As of the 27th of this month, the S&P 500 has moved 43 percent toward its recovery. Those investors chased out of the markets may have avoided some of the declines, but they may also have missed one of the most significant rallies occurring in recent decades.
Of the last six recessions, they all lasted less than 16 months and in most cases in the year following the market’s low point had recovered 20 percent to 60 percent. Only in 2001 was the market still lower after 1 year. Since recessions often provide the worse investment performance for the markets, these periods provide the low values for what makes average returns. The periods following recessions often provide higher than average returns, thus providing the high values that make for average returns. Based upon the recovery thus far, this recession is no different. It is unfortunate, many investors are chased out of the markets during the recessions and they miss much if not all of the recovery following the recession.
From the low, the S&P 500 has gained 299.63 points of the 882.60 needed to reach it prior high value. Those investors waiting for the markets to be “safe” once again, will miss the boat and will be forever chasing the value they once had. When the markets reach extreme ‘oversold’ positions like it did in March, generally the markets will recover part of the losses very quickly. While the markets have moved significantly, a review of many of the fortune 500 companies will indicate many are still trading 30, 40, and even 50 percent below their past highs. Thus indicating the markets still have room for gains, although future moves higher may and should come at slower paces. If you as an investor are unsure what to do, find a CFP that manages investments for guidance and assistance.
For help with managing investments contact me at Quality Financial Concepts or one of the other Certified Financial Planners in our area. To continue a personal quest for education, you can also view our website, www.goqfc.com. There you will find articles on a variety of topics, on-line seminars, calculators, as well as a host of other tools all available for free.