Thursday, May 7, 2009

When Are the Markets Coming Back?

The primary question that my clients have been asking me lately is: “When are the markets coming back?” And the answer to that question is: I don’t know, Tim Geithner doesn’t know, Warren Buffett doesn’t know, and nobody else knows either. If we knew that, we’d jump back in just as soon as it was ready to start roaring again.

But we do know this: The markets will come back. The American economy has proved extremely resilient over time, even at those times when things looked worse than they do now. During the worst part of the Great Depression, from 1930 to 1932, the S&P 500 lost 80 percent of its value. But the record for the single best one-year performance of the S&P is 139.8 percent, for the period from July 1932 to July 1933.

The 1973-74 recession was followed by a bull market that lasted till the end of the Seventies. The scary recession of 1982 gave way to a huge bull run from 1983 to 1987, when the value of the S&P 500 nearly tripled. And so on.

The other thing to keep in mind is that no one expects the markets to be a one-way upward climb. Our portfolios and financial strategies are designed to help you endure tough times as well as to succeed during the boom times. And one day, this crisis will be over, and we'll see those boom times again.

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