If you follow market news, you might have heard that 2019 was one of the better years on the books, with the S&P 500 clocking in over 31% returns (including dividends).
However, taking a tiny step back, you’ll remember the market fell almost -20% during the last three months of 2018, starting 2019 with a significant hole to dig out of. In fact, if you look at the S&P 500 performance over the last two years, you can see the market has only really gone up from previous highs since this past October (graph below).
Additionally, you’ll recall that for the first three quarters of 2019, the Feds (along with most economists) acted on a lack of confidence in the US and global economy, lowering rates three times to brace from what many predicted would soon be the next recession.
All that said, 2019 did turn out to be a decent year in the U.S. market, after several attempts to break through to new heights. Last year was a good reminder that, to all those who claim to know what will happen in the future, what happens next is always the more difficult question.
In fact, Wayne Thorpe, senior financial analyst at The American Association of Individual Investors Journal (a.k.a. AAII Journal), has recently shared with its members that since 1871, market downturns have recovered as follows:
33% of market downturns recover within a month
50% of market downturns recover within two months
80% of market downturns recover within one year
95% of the time those big "once or twice in a lifetime drops" return to even in 3-4 years
Collectively, since 1871, the time it takes for the market to recover (top to trough to top again) is a mere 7.9 months!
With all of its predictable unpredictability, we say farewell to you 2019… the year of Brexit and impeachment (the West’s version of an Arab Spring?).
And on a personal level, we say goodbye to a year that brought our firm significant growth in new clients, team size, and the collective impact we have within our communities. While we can never say what the markets will do next, we hope to provide some peace of mind through thoughtful and thorough planning. With sincere gratitude to all our clients who, despite what happens in politics or the markets, genuinely make it all worth it… Thank You!
US Stock Market Struggling to Break Through Ceiling: Feb 2018-Feb 2020