| I hope you are doing well and staying safe and healthy. As I was thinking about how I could provide the greatest value to you during this difficult time, I realized the best thing I could do is show you why there is hope that your retirement account will recover. People are in different situations, yet there is one thing we are all experiencing: an abundance of uncertainty. There is so much we don’t know and can’t answer at the moment, so how can you make any decisions, or even feel hopeful, right now? One way that has been helpful to me is to use history as a guide. I’ve written about how cycles repeat and have been used by successful people to give guidance about the future. Cycles show us the outcome in the past and we can use them as a guide to what may happen in the future. For example, take a look at this chart. It shows other times the stock market has been down more than -10% at the end of the first quarter. |
Did you know 5 out of 6 times the stock market had a much higher return by the end of the year?
The year with the most similar numbers to the -20% decline we experienced in the first quarter of 2020, happened in 1938. In the first quarter of 1938, the stock market declined -19.43%.
How much higher did it finish at the end of 1938? Up 54.59%. That’s not a typo. It finished more than 50% higher.
When you look at average returns after a 1st quarter decline, the stock market finished up +39.36%, on average. These are real numbers. They really happened.
Each decline was caused by something that created so much fear, the stock market declined substantially and finished negative in the first quarter, but afterward had a tremendous rebound. Each time, the stock market finished positive and higher at the end of the year, 83% of the time.
Only one year (2001) ended slightly negative, down -1.06%. Every other year finished positive.
I can’t promise you the bottom is behind us, but I can show you good odds that we will finish the year much higher. There is hope. There is history. It has happened before, it can happen again.
I’m here for you every step of the way.
Chart is courtesy of Twitter@RyanDetrick, LP L
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