Where do we go from here?
A plan to navigate the road to recovery
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How long will it last?
No one really knows.
On December 1, 2008, the National Bureau of Economic Research (NBER) made it official: the economic recession began in December 2007. While it may seem unusual that it took them so long to announce this, it's actually very common. The time lines below show the last four recessions in the U.S. economy since 1980, indicated by the orange bar. The yellow circle indicates when the NBER actually declared the recession. The reality is that most of the time you don't know about it until after the recession has passed.
While the NBER was pretty timely in the summer of 1981, they were late to call the other three recessions. In fact, during the last two recessions, the NBER didn't make an official call until after we had already come out of the recession.
Take lessons from the past.
Since 1945, recessions have become shorter, lasting less than 12 months on average, and the stock market has been one of the leading economic indicators of when we've hit bottom. Typically, the market bottoms at the midpoint of a recession, before bouncing sharply upwards.
The S&P 500 Index is an unmanaged index of common stocks used to measure stock market performance. It is not possible to invest directly in an index. Past performance is no guarantee of future results.
2 Bespoke Investment Group.
3 Robeco Investment Management, Inc. The Case for Value Investing in the U.S., January 2008.
5 Questions
Think about it!
In the last 75 years (i.e.,1934-2008), the S&P 500 Index has suffered total return losses of at least 20% in 4 different calendar years. The most recent was last year's 37.0% decline. In the year after the 3 previous 20%+ tumbles, the index gained an average of +32%.
Source: BTN Research.