Five years ago, we were getting familiar with COVID-19, from both a health standpoint and an economic standpoint. As the virus spread, economies across the world shut down and we experienced a severe market sell off. The S&P 500 Index lost 34% of its value in one month.[1]
Takeaway #1
We learned that stock markets can move quickly, in both directions. We had one of the steepest selloffs in history and one of the quickest recoveries. The market made back all its gains and went on to hit new all-time highs within five months of hitting bottom.
We also learned that bull markets can last a long time and go a long way. Since Feb 2020 (just before the COVID crash), the S&P 500 Index is up over 95%.[2]
Takeaway #2
Such strong reversals and recoveries occur because no matter the crisis, companies figure out how to adapt and thrive. Companies are in the business of making profits, so when challenges occur that hamper their profits, they adapt and adjust.
Takeaway #3
It is likely we will live through additional crises and market selloffs in the future. What causes it is of little importance – those things can’t be predicted anyway. What is important is how you would like to respond during the next downturn.
Do you want to try to time the market and sell, or take the long view and take advantage of stock market sales? The time to choose is now. Let’s talk so we can plan the best response for you given your situation.
©The Behavioral Finance Network COD00000752
[1] S&P 500 Index from Feb 19, 2020 to Mar 23, 2020. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly.
[2] S&P 500 Index performance from Feb 1, 2020 – Feb 1, 2025 with dividends reinvested. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly. Past performance is no guarantee of future results.
