Continuing on with the theme of last week’s introductory Weekend Word we wanted to touch base on the market’s start to 2016.
In what has been a very trying past 10 months the S&P 500 has dropped 12.49% from its all-time high as of market close last Friday, much of which has occurred in January of this year.
Since 1980 we have experienced Seven bear markets.
If a 12.5% drop feels like this, why would we want to have anything to do with something that drops that much that often?
Well, the S&P 500 opened 1980 at 106; it closed out 2015 at 2,043; a 19-fold increase in 35 years and that doesn’t include dividends.
The world and capital markets have been through this before, and will be again.
As investors we must trust that the companies of the world, in order to survive, will adapt to and overcome whatever the future brings, just as they have done through the seven “catastrophes” that have befallen the market in the past 35 years.
“History does not repeat itself, but it rhymes.”
- Mark Twain
Best Regards,
Wes Nicholson, Mike Allen and Aaron Everdyke
A walk down the old stock market memory lane…
1. November 1980–August 1982: Index down 27%.
Interest rates shot up to the midteens, unemployment rose to ten percent amid a bitterly harsh recession.
2. August 1987–December 1987: Index down 34%.
Most of this crash all came in one day: Black Monday, October 19, when the market dropped 23%. This was the single worst day in the entire history of the American stock market.
3. July 1990–October 1990: Index down 20%.
Coming war in the Gulf, the oil shock, and a recession.
4. July 1998–August 1998: Index down 19%.
The failure of Long Term Capital Management which threatened to collapse the whole financial system: Russia’s default and the collapse of the developing world’s currencies and stock markets.
5. March 2000–October 2002: Index down 49%.
The bursting of the greatest stock market bubble of all time: the Internet mania. Followed up by a recession. Up to that time the largest stock market decline since 1929–32.
6. October 2007–March 2009: Index down 57%.
The Great Panic, followed by the Great Recession. Global credit function all but ceased to exist. Greatest systemic crisis since the 1930s.
7. April 2011–October 2011: Index down 19.4%
The crisis of the eurozone, and even of the euro itself. U.S. government shutdown and the prospect of the Treasury defaulting on its bonds. The first downgrade of U.S. sovereign debt since Alexander Hamilton was the Treasury secretary.
* Index information provided by Nick Murray.
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