Market Recovery Program
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Chapter 3
HOW LONG WILL THE RECOVERY TAKE?
What’s the next essential to discuss?
How long it will take the Dow or the S&P 500 index to get us back to where we were before the downturn: a year? 2? 5? 10 years? 20 years?
Why is this an important consideration?
If we’re convinced that the recovery will take a short period of time -- say, only 6 months -- then we may conclude that it’s best to just leave our money where it is now, in our current equity position(s), and let the market take its course.
I suppose I would want to know how long it’s taken previous bear markets to recover to their pre-downturn levels…
There have been 14 bear markets since the start of the Great Depression and they‘ve lasted anywhere from 6 months to 25 years. The Great Crash of 1929 which lead to the Great Depression didn’t recover to its pre-Crash level until 1954. That’s 25 years. Take a look at Figure 1.
Figure 1
It’s not within the purview of this book to predict either how long it will take for this market to recover or whether its bottom has yet been reached.
One thing I can say with complete certainty is that, yes, the market does in the long-term always come back. What we don’t know is how long it may take. And this is an incredibly important factor if those investments were meant to fund our retirement years. Who wants to wait until we’re 90 to get our money back?
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