What Can We Learn From Past Market Corrections?

Some investors are worried that another market crash could be on the horizon for 2022. The truth is that no one knows when the next crash or correction will happen. Still, when the next market crash comes, how long could the recovery take?

In this segment of Backstage Pass, recorded on Dec. 17, 2021, Fool contributors Toby Bordelon, Jason Hall, and Rachel Warren discuss the market’s track record over the past few crashes, and what investors should remember right now.

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Toby Bordelon: It’s been a great decade for stocks on the S&P 500. What are the numbers we got guys.

Jason Hall: I got it right here. I’ll pull it up.

Bordelon: Right there. You want to show it? What we got here? Look at that. Been a good decade hasn’t it?

Hall: It’s really good. I want to show this to, YCharts added this little button. Guys, 16.7% annualized. Remember that market historically has generated closer to 10%.

That’s should really put it into some solid terms. How good of a decade it has been. We had a couple of viewers have asked us to look at the more short-term to help with the mindset of thinking about the ups and downs in that thing, right?

So, 28% over the past year. 89%, guys remember right here, this was like the most terrifying thing that a lot of people has happened in their investing careers and a lot of people’s happened in their life.

For me, this was the scariest time in my life. Coronavirus pandemic. We did not know and to be here.

Rachel Warren: Yeah, look at that rebound. [laughs]

Hall: It’s incredible and there’s further context on that, too, right? Guys, you mind if I just take over for a second here?

Bordelon: Take us deep Jason.

Warren: Do you Jason.

Hall: This is just I really think it’s important. See this right here. This is the 2007, you know what I’m going to do just to make it a little bit easier to see. So, the bottom was like in October 2007, or the top, the pre-global financial crisis peak was in October.

Look at that. See what that is guys, 4 1/2 years. Still down. It took over five years for the S&P 500 to recover, and that’s total returns so that’s including the dividends.

So from the peak to recovery, that’s how long it took. It took from that October 2007 peak, it was 2012 really, because this is to January 2011, so it was 2012 before the market fully recovered.

We recovered in like seven months. That’s never happened before in any major sell-off or recession. So they’re all different, every one’s different.

Bordelon: Every one’s different. “This time it’s different,” right? Always. But never really, that different. It’s different and it’s not.

Hall: Yeah.

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