The Devil Made Me Do It - Putting the Great Recession in Context

The Devil Made Me Do It - Putting the Great Recession in Context

February 22, 2024

We are approaching the 15-year anniversary when, on March 6th, 2009, the S&P 500 reached a nadir of 666 (the market declining around 20% in the first 2 months of that year alone, the worst 2 month start to a year in US stock market history).


I, like many so many non-meme (aka ‘seasoned’) investors, remember that period like it was yesterday. Daily massive swings in the market (more down than up), our government virtually paralyzed, the end of the world as we know it seemingly around the corner, investors selling otherwise great companies because they simply ‘couldn’t take it’ anymore (many, thankfully, I was able to talk off the proverbial ledge of selling at the very wrong time).


But of course, as always, despite some very real damage to the economies around the world, US stocks rebounded – actually finishing up 24.4% on the year (having rallied over 50% from the lows in March). 


Over the last decade and a half, there have been countless bad headlines (and actual challenging events socially, politically, economically, and otherwise). Any one of these headlines (remember that once in a century event called the pandemic where most of the world’s economies largely shut down?) could have been enough to scare investors out of owning stocks. Yet here we are hitting record highs, stocks having experienced double digit annual average returns since the US was on the precipice of the next Great Depression.


15 years may seem like a long time, but even if you are retiring in a few years (let’s say you are 60 and retiring at 65), you likely have another 20 – 30 years to have your money work for you, stocks being an important part of your investment program to have your money outpace inflation.  Not to mention, stocks recovered and hit new all-time highs within just a few years of the Great Recession of 2008/2009.


Bottom line, when the recession that has been predicted for the last several years actually does arrive (and it will, just no one knows exactly when) – or anytime stocks enter a correction or worse yet a bear market (20+ declines from peak to trough) ­– remember that the US economy and stock market has survived much worse. Don’t let the stock market ‘devil’ turn you into one of those impatient investors who hands their hard-earned money to the patient investor who will gladly take possession of your shares just at right time for him (and wrong time for you – when stocks are down, and you don’t need the cash for years). 


Instead, create a financial plan, properly allocate your assets between shorter-term investments like cash and bonds for near-term needs, and longer-duration assets like stocks, real estate, alternative investments, etc. for your 5-10+ year future self. If you don’t have the time or wherewithal to set forth and more importantly execute with discipline and patience an investment program unique to you, then seek out a financial professional who can put and keep you on the right path regardless of what the world throws our way in the next 15 years and then some.