Bear Market Recoveries: Returns Occur Early In New Cycle
Once a bear market cycle ends, a large portion of the returns in the next bull market occur early in the new bull market cycle.
Schwab Center for Financial Research, with data from Morningstar, Inc. (
MORN) reviewed total monthly returns of the S&P 500 Index (
$INX) from January 1926–September 2008. Cash is represented by total returns of the 30-day T-bill. The 15 historical bear markets analyzed are defined as periods with cumulative declines greater than 10% and durations of at least six months, and do not include the current market.
As the below table notes, a large portion of the bull market returns historically occur in the first year following the bear market.
(click to enlarge)
Given the recent market volatility, it is prudent to review ones overall asset allocation. During this review, one of the hardest temptations to overcome can be the desire to move more investment assets to cash. Certainly if funds are needed near term, cash needs to be set aside. Keep in mind though, large returns tend to occur in short bursts and early in the new bull cycle. In just the last five trading days, the
S&P 500 Index is up 19.1%.
Source:
Ready for the Rebound? (PDF)
By:Bryan Olson, CFA
Charles Schwab & Co.
November 17, 2008
http://www.schwab.com/cms/P-727392.35/2008_11_SPC_Investing_Insights_newsletter.pdf?cmsid=P-727392
The above story is the opinion of the author only and it does not reflect
iStockAnalyst opinion. Further, the author is not personally advising you
regarding the suitability of the story for your investment needs. In no event
iStockAnalyst will be liable for any loss or damage including without
limitation, indirect or consequential loss or damage, or any loss or damage
whatsoever arising from or arising out of, or in connection with the use of this
information. Please consult your investment advisor before making any investment
decision.
