There is a very interesting article in today's Seattle Times. With stock investors getting more jittery with each passing day, it's important to put the recent market turmoil in some kind of historical perspective.
"Recessions on average last 216 days, or just over seven months, and stocks post an average 8.64 percent decline during the first half of the pullback, according to Citigroup data dating back to 1953."
It's important to keep in mind that the markets topped in late October, which means that we are about half way through the current economic softening. We are also much farther down than the average 8.64% decline, as we are almost double that in term of broad market losses.
So why be optimistic?
"Investor sentiment is suffering because of recession worries. The weekly survey by the American Association of Individual Investors found that nearly 59 percent of its respondents were bearish, the most since 1990, according to Bespoke Investment Group.
"At first glance, that sounds dismal for stocks. When the AAII survey in the past has gone bearish above 55 percent, however, the S&P 500 has been higher one year later, Bespoke said.
"While the first half of a recession can punish stocks, the second half tends to reward investors. During the nine recessions dating back to 1953, S&P 500 stocks have gained 13.17 percent on average in the latter half of a recession, according to Citigroup."
Based on this historical data, i wouldn't be surprises to see a huge market rally that will start in the upcoming days.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no positions in any stock mentioned as of 1/20/08
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Reader Comments (Page 1 of 1)
1-21-2008 @ 7:39PM
MediaMentions said...
Investors scared by every little thing (San Jose Mercury News, 20 Jan 2008, Page 4E)
http://www.pressdisplay.com/pressdisplay/showlink.aspx?bookmarkid=V6HGHAE0MGM8&preview=article&linkid=ec09794d-028a-4c18-bf12-37647e65d472&pdaffid=ZVFwBG5jk4Kvl9OaBJc5%2bg%3d%3d