Most importantly, investors need to remain disciplined with their investment process throughout the volatility. History has shown that markets will eventually recover and may reward patient investors. Few investors could have predicted that a viral outbreak would end the longest-running bull market in U.S. history.
Now, the COVID-19 pandemic had pushed stocks far into bear market territory. From its peak on February 19th, the S&P 500 fell almost 30%. While volatility can cause investors to panic, it’s helpful to keep a long-term perspective.
Black swan events, which are defined as rare and unexpected events with severe consequences, have come and gone throughout history. We explore the sell-off size and recovery length for some of these events. With selloffs ranging from -5% to -50%, black swan events have all impacted the S&P 500 differently. The chart takes a look at select events over the last half-century.
While the declines can be severe, most have been short-lived. Markets typically returned to previous peak levels in no more than a couple of months. The Oil Embargo, Black Monday, and the Global Financial Crisis are notable outliers, with the recovery spanning a year or more.
Partner, Financial Planner
Mike enjoys getting to know and understand his clients and their needs. Mike guides clients through the financial planning process to help them identify their goals and create a plan to achieve them. His expertise is working with folks nearing retirement and young couples looking to save for retirement and plan for their children’s education. Mike retired from the Air Force in 2014 and went back to school as a non-traditional student at the University of Northern Iowa. He obtained a bachelor’s degree in accounting. Mike is a CERTIFIED FINANCIAL PLANNER™, and a member of the National Association of Personal Financial Advisors, XY Planning Network and Fee Only Network.
