Welcome to Market Insights from Southwest Investments. I’m your host, Rick Zich. Today, episode 18, Bounce Back. Joining me this morning is Bart Schannep. Bart, welcome to the show.
Bart: Good morning Rick, thank you.
Rick: How are you doing today?
Bart: I’m doing very good.
Rick: Excellent. Today, bounce back, we’re talking about just the overall market right now is tough. Most recently, three-million-plus unemployment claims that were filed in the past week. Unheard of, unprecedented, all those other kinds of things that we hear in the marketplace. We’re going to talk a little bit about bounce back regarding that. Alright. Why don’t you start us off?
Bart: Excellent. The coronavirus obviously has been a very big deal and has affected everybody. In our country, we saw our markets head down. At moment, the lowest point on the S&P 500 was down 34 percent from the all-time high. Now, we know we’ve talked about before market weaknesses and that a market drop or decline of around 20 percent or better happens about once every three and a half years. We’ve talked about that before, and it’s been a while since we’ve had anything like this.
What about the bounce back? Okay. Let’s talk about that. Now, not every bear market is accompanied by a recession, but every recession has a bear market. Now, with the unemployment claims of three million just recently, that no doubt will lead to a recession. We don’t know. Not enough time has gone by, but we’re sensing general economic slowdown that should imply a recession.
Rick: That’s right. There are lots of things out there, whether it’s the internet you’re reading, newspapers, just individual advice that you might be getting from another financial advisor. Recession is one of those terms that is commonly being thrown out there.
Bart: Right. Now, the problem is, frequently we don’t know when a recession starts. We don’t necessarily know when a recession ends until it’s been over for a while. As you can see on the accompanying chart, from the lowest point of the market, and again, we don’t know when that is, but at the moment it was March 23rd 2020, we had been down 34 percent.
On the accompanying chart, you can see how the markets have bounced up from the low point of the bear market to when the recession is declared over. My point of showing this is it’s not okay to simply wait until you feel better and when the recession is declared over to then start thinking about investing.
Rick: Looking at that last chart where it shows the March 2009, 94, is that a percent?
Bart: Yes. The market went up 94 and a half percent from the bottom. It almost doubled [Crosstalk] [03:29] before the recession was declared officially over.
Rick: Doubled. That just goes to show you that this is just one of those things that if you don’t get in early enough, or if you get out, you’re going to be missing out. Those are the real two things that we deal with on a regular basis,. Fear, we’ve talked about fear and grief in the past. That fear is if you get out of the market, it’s really difficult to get back in. That 94.5 percent is what you’re going to miss. That was the large one, but look at August 1982 was a huge.
Bart: Went up 123.8 percent before the recession was declared over. It goes back to the adage, “Buy low, sell high.” What that necessitates is buy when it’s scary.
Rick: Excellent. Well, thanks so much, Bart. I appreciate that information. Again, the market bounces back. It’s been that way in the [music plays] past, and history has shown. Thanks so much for joining us. We’ll see you next time around.