We are due for a stock market correction
Family Update: My wife and I are going on a romantic vacation next week for the first time in years. My Mom (Grammy) is flying down from Pittsburgh to watch the kids. It has been a very tough year. As many of you know, my wife was diagnosed with Stage 2 breast cancer about a year ago. The surgeries are over and the cancer is gone, and I hope my wife can have a week of peace to regain some of her strength.
Well, the good times are here. The markets are going up. People are making money. Everyone is happy.
Yet I have had several people say to me this week, “We are due for a stock market correction. The market has been going up for 8 years. We are due.”
So. Are we?
I have no idea. Nor does anyone else.
Let’s look at the history.
We are going to ignore “short” crashes. In 2015 markets were down 13% before they rebounded and ended slightly positive for the year. We are only looking at prolonged recessions.
1929 and the Great Depression is the first example. The markets were down in 1929, 1930, 1931, and 1932. (By the way, the markets were up 43% in 1928 and up 50% in 1933. Why is nobody talking about those years?!)
After 1932 how long did it take for the markets to crash again? Five years later. In 1937, we saw the start of World War II and the markets reacted negatively.
The next crash? Three years later. 1940-1941 weren’t great with the market dropping over 20% during those two years. Again due to World War II.
Next up? You have to go all the way to 1973. Richard Nixon resigned and the oil embargo was in full effect. 32 years passed between major recessions.
Thirteen years later, in 1987 we experienced “Black Monday” where the markets had the largest one-day percentage drop in history (-22.6%). But the markets recovered in a little over a year, so I’m not sure if we should count that example.
After that? 2000-2002. During this time, the dot-com bubble burst and we experienced the attacks on 9-11. But, once again, it was 26 years between prolonged recessions. The market didn’t have a single year where it lost more than 7% during that 26 year period.
2008 was the next and last recession. Anyone reading this article felt that one personally.
So, let’s go back to the original question. Is the stock market ‘due’ for another recession? Is has been 8 years, right?
Nobody knows, and the really great news is: It doesn’t matter! Time in the market matters much more than timing the market.
So keep a long term focus and enjoy the good times we’re having now.
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