Calm, Composed, Peaceful
7 Years On – Global Market Meltdown Redux
Just 7 years and one day after the March 9, 2009 bottom, the S&P 500 is up almost 200%. That qualifies as far more than a mere “recovery” in my book, although no one in the media seems to be telling that happy story. They never do.
Last night I reviewed some dire headlines from seven years ago and compared them to what I told my clients during DeYoe Wealth Management’s Spring 2009 Capital Markets Outlook webinar in May.
The one thing that leapt out at me immediately? Where the media found only disaster, I saw the the opportunity for investors willing to stay the course in turbulent seas and reminded our clients that faith, patience, and discipline are the investor’s cardinal virtues.
Here’s a real gem from the March 9, 2009 Wall Street Journal:
DOW 5000? There’s a Case For It
“As earnings estimates are ratcheted down and hopes for a quick economic fix fade, the once-inconceivable notion of returning to Dow 5000 or S&P 500 at 500 looks a little less far-fetched.
A decline to 500 on the S&P is 183.38 points and 27% away. The index already has lost 881.77 points, or 56%, since its peak in October 2007. The index, which lost 7% last week, hasn’t been below 500 since 1995, when the tech-stock bubble was just beginning. After dropping 6.2% last week, the Dow is 1626.94 points and 25% above 5000, a level it also hasn’t seen since 1995.”
No one knew that the recovery had already started when the New York Times sounded the following alarm on April 3, 2009:
663,000 Jobs Lost in March; Total Tops 5 Million
“It’s really just about as bad as can be imagined,” said Dean Baker, a director of the Center for Economic and Policy Research in Washington. “There’s just no way we’re anywhere near a bottom. We’ll be really lucky if we stop losing jobs by the end of the year.”
Lonely House in Cold Wilderness
I didn’t “know” things were turning around either, but here are a few quotes from my May 7, 2009 webinar that I think have withstood the test of time:
“Low Valuations and wide spreads in fixed income present good opportunities for investors with discipline.”
“This period of time, when you are dollar cost averaging into your 401k, is the BEST time to be dollar cost averaging – it is THE TIME to be buying.”
“I think we’ll see a return to previous highs – I don’t think there is a question about this. But I don’t hold any illusions that this time around the average 2.2 years [average time to recovery for all Bear Markets since WWII] is our timeframe. I think it is likely that markets will revisit their highs in the 3-5 year time horizon.”
It actually took the S&P 500 4 years and the more global MSCI All Country World Index 4.5 Years to recapture their 2007 market highs, so I wasn’t too far off.
Although I got the recovery time frame right, this wasn’t me being smarter than the average bear market analyst. It was me being lucky and humble. I reviewed the history of markets, considered their valuations, and admitted what I didn’t or couldn’t know. And, as a final step, I returned to my fundamental belief in the long-term growth trajectory of the world economy.
I couldn’t possibly know how the economy or markets were going to recover. No one did. But I believed that they would recover. Every precedent, all of human history, and the basics of human nature convinced me they would.
It was this belief that enabled me to stay invested and keep our clients invested during the most difficult time in my career. It is the period in my career that was the most difficult, but of which I am the most proud.
Today’s turbulence in the markets is breeding a whole new round of headlines, but I suggest turning to my father’s favorite poet (excuse the gender specificity, my dad had two sons), instead:
If – by Rudyard Kipling.
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too . . .
. . . If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And—which is more—you’ll be a Man, my son!
When investing, as in so much of life, in the end… calmer heads prevail.
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