What Can We Learn From Past Market Corrections?

Some investors are concerned about the possibility of another market crash on the horizon for 2022. The truth is that no one knows when the next crash or correction will occur. However, when the next market crash comes, how long can it take to recover?

In this section of Backstage pass, registered in December 17, 2021Fool contributors Toby Bordlon, Jason Hall and Rachel Warren discussed the market’s track record over the past few crashes, and what investors should remember now.

Toby Bordlon: It’s been a great decade for stocks in Standard & Poor’s 500. What numbers did we get guys.

Jason Hall: I got it here. You will pull it.

Bordeaux: right there. Want to show it? What do we have here? Look at that. It was a good contract, wasn’t it?

lounge: It is really good. YCharts added this little button I want to show this. Men, 16.7% year on year. Remember, the market has historically made close to 10%.

This should really put it in some solid terms. How good it was a decade ago. We’ve been asked by our viewers to look at the short term to help with the mindset of thinking about the ups and downs of this thing, right?

So, 28% over the past year. 89%, guys remember here, this was the scariest thing that’s ever happened to a lot of people in their investing careers and to a lot of people in their lives.

For me, this was the scariest time of my life. Corona virus pandemic. We didn’t know and we won’t be here.

Rachel Warren: Yeah, look at that bounce. [laughs]

lounge: It’s unbelievable and there’s another context around that too, right? Guys, do you mind if I take over here for a moment?

Bordeaux: Take a deep breath, Jason.

Warren: Is Jason?

lounge: This is just what I think is really important. Look at this here. This is 2007, you know what I’m going to do just to make it a little easier to see. So, the bottom was like October 2007, or the top, it was the pre-global financial crisis peak in October.

Look at that. Look what this is guys, 4 and a half years old. It’s still down. It took more than five years to Standard & Poor’s 500 To recover, this total returns so that it includes profits.

So, from peak to recovery, that’s how long it took. It took from the peak of October 2007, it was really 2012, because that’s to January 2011, so it was 2012 before the market fully recovered.

We recovered in seven months. This has never happened before in any major sell-offs or recessions. So they are all different, each one is different.

Bordeaux: Each one is different. “This time is different,” isn’t it? Always. But it is no different. It is different and it is not.

lounge: indeed.