Last month marked the ten year anniversary of the beginning of what ultimately became one of the most significant financial collapses and recessions in our history. Investors closer to retirement saw decades worth of retirement savings seemingly disappear from their 401(k) balances and many young investors were scared out of stocks for good. And yet, just six months following the beginning of the crisis (March 2009), the stock market began what just recently became the longest uninterrupted period of growth EVER.
Perception of the stock market since 2008
It turns out that nearly half the country has a negative view of the stock market and how it has performed in the time since the crisis. In fact, a recent study showed that 48% of those surveyed thought that the US Stock market had not gone up at all in the last ten years. 18% actually thought it had gone down. The number of people that own any stock at all has never recovered from prior the the crash either. In 2007, 65% of Americans owned stock in some form or another, but today, that number remains much lower at 55%. So what has actually happened to stocks these last ten years, and what valuable lessons should all investors be reminded of in all of this?
The Brutal Truth
It turns out that not only have US stocks increased since the bottom in March of 2009, but the S&P 500, an index representing 500 of the largest publicly-traded American companies, is up over 350%. That is a market that has more than quadrupled it’s value in just 10 years! In other words, looking back, the crash of ‘08-’09 was an historic investment opportunity for those that were able to stay calm and focused on their long-term goals. What many view as the perfect example of why NOT to risk your money in the stock market, has actually become one of the best examples in a lifetime of why it’s so important to invest in stocks when you have a long-term goal like retirement. And for those that don’t have as much time on their side, the crisis proved the importance of including other assets like bonds and cash in their portfolios, in order to help preserve any money they may need for income in the short-term.
Today and Beyond…
As we continue to extend what is now the longest period of uninterrupted stock market growth in US history, let’s not forget what happened just ten years ago, and the important lessons we all can learn from all the chaos that became known as the Great Recession. There is absolutely no way to know when we’ll experience another event of that magnitude, but we should expect many many corrections of 10% or more in the coming decades, just as we’ve seen at least once nearly every year over the last century. For those with a long term goal like retirement, remember how important it is to be the one staying calm while the world around you panics. Stay focused. Keep investing. Become the investor most wish they would’ve been a decade ago. We can help you get there. It’s what we’re here for.
Published on October 8, 2018