The sky is falling! The sky is falling? Will the sky ever fall?

S.F. Ehrlich Associates |

February 15, 2020

In this instance, the word “sky” refers to the stock market, and all that happens when markets fall. As we haven’t had a so-called bear market (i.e., a loss in value of more than 20%) in more than ten years – though we came within a whisker in the fourth quarter of 2018 – there are undoubtedly millions of investors who believe the bear is around the corner. Or maybe it’s the next corner.

With history as our guide – because we still are unable to predict the future – it might be informative to highlight past bear markets and how long it took to recover from peak to peak. (We concede this knowledge may not feel as reassuring amid a correction.)

The table below1 shows the performance of the S&P since 1900, to include significant historical events along the way. As can be seen, the direction of the market is upward, with market corrections along the way.


While none of us have a 100-year time horizon, focus on 20- or 30-year periods (or longer, for younger folks) because those are most likely the investment periods for the dollars you have invested in the equities markets. More importantly, it’s that 20- or 30-year+ time horizon that supports the argument against market timing, even when markets perform horribly (see the 2008-09 global credit crisis). If you know you have a very high probability of winning over a long time horizon, why gamble in the short-term? In the long run, what happens in any given year (or two) is mitigated when a market cycle completes its recovery. 

In addition, the chart below details how long markets take to recover when things go sour. Markets mend; it just takes time.




1 Kelly, David, et al. “J.P. Morgan Guide to the Markets, December 31, 2019 Ed.”
Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by S.F. Ehrlich Associates, Inc. (“SFEA”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from SFEA.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  SFEA is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of SFEA’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a SFEA client, please remember to contact SFEA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, or revising our previous recommendations and/or services.