Historical Perspectives
When the Levee Breaks: How history can help us understand the recent stock market crash
The chart above, which illustrates the unprecedented volatility that led to September and October’s tremendous destruction of investment wealth, has been a sobering lesson in how poor choices can cascade through the markets, wiping out nearly unimaginable sums in mere days. Every investor’s eyes have been glued to the seemingly unending stream of bad news coming out of the markets and broader economic indicators. Certainly, we would all prefer to avoid downturns like the one we have watched over the past few months; however, history shows us that any time we experience either a strong bull or a strong bear market, we should expect an eventual correction. And while we all hope that future corrections will be far less dramatic than recent events, keeping the cyclicality of the markets in mind can help us to fight the urge to stash all of our assets in the metaphorical mattress, or to bury them in the backyard.
While it’s certainly too soon for us to determine whether or not we have seen the bottom of this particular downturn, we wanted to discuss how and what we can learn from history during times like this. Also, we wanted to consider the question of why market crises appear to be getting more frequent and more dramatic, even as the underlying economy has become less volatile. Finally, we will discuss some of the ways that we can begin looking to the future, what we can do both to weather the current storm and to take advantage of opportunities once it has passed.
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Above information is for illustrative purposes only and has been obtained from reliable sources but no guarantee is made with regard to accuracy or completeness. It is not an offer to sell or solicitation to buy any security. The specific securities used are for illustrative purposes only and not a recommendation or solicitation to purchase or sell any individual security.
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Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author on the date of publication and are subject to change. This publication does not involve the rendering of personalized investment advice.
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