Investors who fret over the possibility of another stock market meltdown should consider that what goes down tends to go back up — the snap-back of stock market recoveries usually reverses the damage.
Many investors who were seared by the 2008 market crash are still timid, according to CNN Money.
“Fearing a repeat, they've stayed on the sidelines by keeping their money in cash. They missed out on the great bull run of the past six years. Now that stocks are at all-time highs and look somewhat expensive, these investors are understandably even more scared to get back in,” according to CNN’s Matt Eagan.
Egan said that even those who dive into the stock market just before a meltdown are often whole again in pretty quick order.
According to an analysis by financial tech firm CircleBlack, even investors who threw money into stocks just before the Great Depression could have made their money back with a little patience. CircleBlack estimates those who put $1,000 in the S&P 500 at the beginning of 1929 and then added $1,000 each year after — similar to today’s IRA or 401(k) investing — got back to breakeven within seven years.
"These results suggest that for investors with a long time horizon, the downside of even a worst-case scenario isn't that dire," Adam Freedman, chief investment officer at CircleBlack, said in a recent report cited by CNN.
More recent stock market plunges may have been even less daunting for patient investors.
CNN reported it took only two years for investors in the U.S. stock market to get back back to breakeven after the 2008 market sell-off, five years after the 2000 bubble burst, and three years after the 1970s recession ended.
Michael Gayed, chief investment strategist at Pension Partners, wrote in a guest column for MarketWatch that those who wonder if there will ever be another stock market correction should get their answer fairly soon.
He suggested the recent selloff in Treasurys, which tend to go up in the midst of stock corrections, may be like a coiled spring ahead of things to come.
“Rather, the selloff may be an opportunity for Treasurys to rally again hard sometime toward the end of March/early April, and finally be the true positive of a correction in stocks,” he predicted.
Paul Farrell, MarketWatch’s resident doomsayer columnist, is more than a tad more pessimistic than Gayed.
In a new column this week, Farrell predicted a stock market crash of 50 percent is ahead for 2016, partly because stocks have similarly suffered during some other past presidential election years, and he says history could simply repeat itself.
Farrell’s anticipated Crash of 2016 will be “one that promises in the end to become bigger and badder and far more dangerous than 2008, 1999 and 1929 combined,” he claims.
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