I want to start by saying, “Happy anniversary!” This is the 10th anniversary of the official end to the Great Recession.
Of course, we know now only because it’s all in the rearview mirror that the stock market hit its all-time low March 9, 2009, after falling 56% from its peak in October of 2007.
We had about 15 months or a little longer of horrific markets, but interestingly enough there were some pretty amazing rallies in that bear market. There were a couple of rallies that were upwards of 20% and yet the market still, at the end of that bear market, was down over 56%.
Here’s the question, and you have to bring yourself back to March 9, 2009, if somebody would have said to you, “Today’s the day, go all-in. Let’s double-up unless and just bet everything on the stock market for the next 10 years.” People would have thought that you were insane! They’d want to know what you’ve been smoking and ask for some of it. Right?
Fear Plays a Role
Then, the fear was out of control. People had lost mountains of money. People that had retired a year or two years before had decided to go back to work. And people that were planning on retiring postponed their retirement date for four or five years. Some of them never got back into the market, and some of them lost dearly.
Now, we know that since that low, but the market is up 440% which is fantastic. But nobody that I know said, “Today’s the day to go all-in.” on March 9, 2009. Remember the phrase that was coined in that year? My 401 turned into a 201. Some people got a good chuckled at that, but it wasn’t a bit funny for those who had planned to retire in 2009, 2010, or 2011. They lost too much. This leads me to my next point, if you don’t understand the risk you have in your portfolio then don’t be surprised when you perhaps have a significant decline when markets go through these types of cycles
What We Know Now
Remember, we didn’t know that March 9, 2009, was the bottom until probably 6 months later after people had looked into the statistics. No one in their right mind would have invested a lot of their money in the market at that point. I bring this up because on average bear markets happen every three and a half years, and we have not had a bear market now for 10 years. On average bear markets decline 32% and last 10 to 15 months. Today, we are 10 years into an expansion.
Interestingly enough, if you had invested at the peak in October 2007, you’d be up only 129% as opposed to 440% if you had invested at the low on March 9, 2009, of 56%. Here’s the thing though, economic cycles have and always will have expansions and contractions. Equity markets have and always will have expansion and contractions. They are going to be a part of your life. They’re going to be a part of your life as you’re working and they’re going to be a part of your life as you’re heading into retirement.
The most critical time is 10 years before you retire and while you’re retired. It’s not just the equity markets and the decisions that you make within your investments that matter then. It’s also how and when you claim your Social Security, it’s the mitigation of taxes, and a plethora of other critical decisions that you don’t get do-overs on. To help you we’ve created the Retirement Plan Checklist that has chronological and age-based rules and items that you need to be doing at certain times to and through retirement. The Retirement Plan Checklist is 14 pages long and is designed for those of you that plan to retire within the next 10 years or who are already retired and a saved at least $500,000 for their retirement journey. It’s a great resource you can find by clicking below.
Let’s make some observations, we have been an economic expansion for 10 years. Some people have called this the ugliest expansion that we’ve had because it’s been benign. We had benign growth. We had massive tax cuts that spurred economic profits, and those profits are now beginning to slow down. They’re not a negative by any means, but they’re starting to slow down. And it has been a long time! So, there’s a lot of people out there today that might be skeptical, maybe a little bit more cautious but they’re also hopeful. There’s nothing wrong with being skeptical! This is a great time to check that out for yourself. I think that right now is the time where you should start being skeptical you should start saying, “Alright, what’s going to happen? What do we need to do? How do I prepare?”
Bud Kasper and I examine those questions and talk about the last 10 years in the markets, the three main characteristics of a bear market, and whether or not we might be looking in the eyes of a bear market at this time on this week’s episode of America’s Wealth Management Show. Don’t miss it on Saturdays at 11:00 AM on 98.1FM KMBZ. If you missed the show or want to listen on the go, you can subscribe to our show as a podcast on iTunes or Stitcher. You can also listen to recent episodes online on our Radio Show page.
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