Democracy Dies in Darkness

| Perspective

It’s hard to even remember the stock market terror of 2009

By Allan Sloan

March 8, 2018 at 4:35 PM

In this March 9, 2009 file photo, businessmen arrive at the New York Stock Exchange in New York. Fear and panic enveloped the stock market and the Dow Jones industrial average plunged to 6,547 on March 9. Many investors thought it would take a decade or longer to get back to the record of 14,165, set on Oct. 9, 2007. (Mark Lennihan/AP)

Welcome to the U.S. stock market’s Pottery Day. Pottery, you see, is the traditional gift for a ninth anniversary, and Friday is the ninth anniversary of the terrifying day in 2009 that the U.S. stock market hit what turned out to be a bottom, amid worldwide financial convulsions that made people afraid that stocks would keep going down forever.

Why bring up this anniversary? As a reminder of the not-so-recent past, when — unlike today — fear verging on terror ruled the financial markets. And to try to put things in some sort of perspective.

At the market’s close on March 9, 2009, U.S. stocks had fallen a stomach-wrenching 57 percent from their Oct. 9, 2007, peak, as measured by the Standard & Poor’s 500 and the Wilshire 5000 indexes. For those of us (including me) who had large parts of their net worth tied up in stocks, it was a really scary time.

But those of us who didn’t bail out have been rewarded. Richly. That decline, the second-steepest since 1932, has been followed by the second-longest bull market since then, which will become the longest if it lasts through late August.

Combine these two extremes — a terrifying bear market followed by an ultralong bull market that emerged when many investors were in the depths of despair — and you see how difficult it is to be a successful market-timer.

Related: [Why each new Dow record is a bit of a snoozefest]

You also see that what has been going on for years and that you’ve become accustomed to — be it a rising or a falling market — won’t necessarily continue. It could turn 180 degrees, beginning tomorrow. Or even today.

“You never really know when you’re out of a bull or bear market until it’s been in your rearview mirror for a while,” says Robert Waid, managing director at Wilshire Analytics.

Indeed.

Now, some numbers. Since March 9, 2009, the market has more than quadrupled, by Wilshire’s math. It has almost quintupled if you include reinvested dividends, which shows the impact dividends can have when you let them compound for significant periods. (The exact numbers: Through Wednesday, stocks were up 313 percent since the market bottom, and their total return, including dividends, was 391 percent.)

According to Howard Silverblatt, senior index analyst at S&P; Dow Jones Indices, the longest bull market in modern financial history ran from Oct. 11, 1990, through March, 24, 2000. The current bull market, he says, “will tie the current record-holder on Aug. 21, 2018.” Assuming, of course, that we’re still in a bull market when late summer rolls around.

Silverblatt, a fun-with-numbers guy, says the bull market’s age is equivalent to 140 people years. How so? He divides the 108-month age of the bull market by the 60.7-month age of the average bull market and multiplies that result by 78.6, the current U.S. life expectancy. Voilà! You get 140.

Related: [Making sense of the stock market madness]

That number, if you’re keeping score, is up from 127 a year ago, when the bull market was a year younger, bull markets’ average length was a bit shorter and U.S. life expectancy was a bit higher.

Now, let’s look forward instead of back. Will we be drinking champagne on Aug. 22 to toast the longest U.S. bull market in history? Will we be in the initial stages of a bear market? Will I be writing about the tin — i.e., the 10th — anniversary of the bull market in March of 2019?

I wish I knew the answers to these questions. But I don’t. And no one does. We can study the past all we like, but it doesn’t tell us what the future will bring or when it will bring it. And that, my friends, is the bottom line.

Read more:

Related: How late-in-life dads — like Trump — are eligible for a Social Security bonus

Related: A column I never thought I’d write: Ideas to trim your income tax bill

Related: Let’s run the fantasy math on Social Security


Allan Sloan is a columnist for The Washington Post. He is a seven-time winner of the Loeb Award, business journalism's highest honor.

Post Recommends
Outbrain

| Perspective

It’s hard to even remember the stock market terror of 2009

By Allan Sloan

March 8, 2018 at 4:35 PM

In this March 9, 2009 file photo, businessmen arrive at the New York Stock Exchange in New York. Fear and panic enveloped the stock market and the Dow Jones industrial average plunged to 6,547 on March 9. Many investors thought it would take a decade or longer to get back to the record of 14,165, set on Oct. 9, 2007. (Mark Lennihan/AP)

Welcome to the U.S. stock market’s Pottery Day. Pottery, you see, is the traditional gift for a ninth anniversary, and Friday is the ninth anniversary of the terrifying day in 2009 that the U.S. stock market hit what turned out to be a bottom, amid worldwide financial convulsions that made people afraid that stocks would keep going down forever.

We're glad you're enjoying The Washington Post.

Get access to this story, and every story, on the web and in our apps with our Basic Digital subscription.

Already a subscriber?

Secure & Encrypted