The Critical Market Recovery Lesson of 2020

I’m sure 30 years from now the sting of 2020 will have faded, but there are a few things I hope we never forget. Some are even good things! Specifically, I am referring to the most amazing market recovery we have ever witnessed.

Would you believe that, after enduring a 34% market decline in February and March, as of July 10, 2020, the market is up 6% over the past 12 months? Year-to-date, the market is only down 2.6% (using the S&P 500 as our market proxy).

S&P stock market graph showing an overall growth of 6% between July 10th, 2019 and July 9th, 2020.

It’s hard to believe all but 2.6% of 2020’s losses (to date) were recovered in just 2 months and 16 days. According to the USDA, you can safely keep eggs longer than that! One of the most important investment lessons of your life just happened and if you blinked, you missed it. Many times, a risk-averse client has told me, “I don’t have time to wait for recoveries.” My response (pointing to the 2020 stock chart) is, “No, you don’t have time to miss recoveries.”

What do I mean by “You don’t have time to miss recoveries”? What I mean is–in a matter of just 10 weeks–we have witnessed the market produce 3 years’ worth of average returns. An investor who panicked, sold at the bottom, and waited just 10 weeks before getting back in, gave up the equivalent of 3 years’ worth of their investment time horizon.

Abraham Lincoln was right when he said it is “not best to swap horses when crossing streams.” The market decline and recovery of 2020 illustrates just that. Without question, the best strategy has been to ride it out. If you find yourself in the middle of the stream without a solid grip on your mount, do not waste another minute. Call and schedule a consultation with an HFG Trust advisor today.