Recoveries Don’t Follow Straight Lines

What should you know?

We know that temporary market downturns are a normal part of the investment journey and should NEVER be feared, as long as your investments are correctly aligned with your goals.

Historically, we have seen that the way down is usually fairly short and sharp. However, the rise from the bottom back up to the top is varied in duration and can be a bumpy journey.

The chart below shows the last 10 bear markets and recoveries in the S&P 500 index:

Why should you care?

When markets hit rock bottom and start to rebound, we are eager to believe that the recovery will be a straight line back to the top. In reality, it doesn’t always work like that.

The recuperation of markets tends to move in fits and starts and may hit temporary setbacks along the way. The key is to be patient and to take solace in the fact that stock markets will ALWAYS recover, it is just a question of how long we have to wait.

If you are still in your working years and accumulating wealth, then the longer these temporary declines last, the better it is for you (as long as you continue to invest throughout).

If you are retired, you may need to temporarily adjust your spending, or draw down on cash reserves until markets complete their recovery.

In either case, we know that the sun will rise again, bringing with it the next cycle of growth.