Long term market outlook
Here are a couple of truths: 1) The economy and the companies within it, as a whole, are doing fantastic. 2) The market has made an incredible recovery so far and it looks like it will continue to do so. Both of these in
spite of what the media and popular opinion tells us.
Our minds tend to remember the bad times more than the good and the memory of the market crash 2 years ago is still fresh. It is difficult to look forward for investors but essential to make significant progress.
As we go through difficult times it is much easier to view yourself as a victim rather than an opportunist. When challenging times present themselves, many people back into a corner and play the role of the victim. There are a few however, that take each situation, no matter how difficult it is, and look for the positive or opportunity within it.
When it comes to bear markets, such as the one we experienced in 2008 and 2009, we have to accept it and move on. The bear market is over. What we also have to do is look ahead. What will happen going forward?
Attached is a fantastic report released by the American Funds that shows how the market performed AFTER market declines. In this study it shows an amazing positive return following major market corrections. The average annual total return for the five-year periods after each decline was positive 100% of the time, with an average annual return of 18.95%. In addition, the investments doubled 75% of the time. Impressive!! Click on the picture to the right to open the pdf.
My
only complaint with this report is that it only goes out 5 years. I have examined past historical market corrections myself and concluded that the 10-20 year market performance after a correction to be substantially positive as well.
Of course there will always be someone who says, “This time is different” and it isn’t. This time is not different, period! For that reason I have also included one of my favorite graphs published by Navellier and Associates titled The World Is Coming to an End…AGAIN!! In this study it shows an endless amount of negative “world end” news inversely correlated with outstanding positive performance in the S&P 500. Click on picture to the left to open pdf.
Will the next 5 years be positive? That answer isn’t certain yet but if history repeats itself it can be assumed we will have outstandingly positive performance!
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