Lets answer this with some takeaways I’ve learned from studying 8 market crashes of the last 8 decades
This is the 9th…
- We have a crash greater than 20% every decade on average. It’s relatively normal.
- The average crash decline is about 40% from high to low.
- The median crash duration is 41 months (from the initial 20% decline until a full recovery is made).
- The market bottom occurs at a median time of 7 months after the initial 20% decline.
In other words, on average, we crash and bottom in 7 months, and then take 34 to recover (41 total).
Granted, knowing this doesn’t give you a magic ability to pick the bottom, but it certainly adds weight to the old adage:
“Stocks crash by the elevator and recover by the staircase.”
So if you’re a long-term bull, don’t sleep on the crash — and don’t wait too long for a full recovery to happen without first getting some meat in the game.
The majority of the decline tends to happen early in the historical crash cycles.
Another way of saying it, is that the typical market crash:
❌ Doesn’t make a “V” shape
❌ Doesn’t make a “U” shape
✅ It makes a “NIKE tick” shape! (A sizable early drop followed by an extended recovery period)
So what should you do?
I have no idea when the bottom will be or if it has past so my work around is average in.
Invest regularly once I have build up funds for an investment block.
I also place pending orders at significant discounts of current prices. Where I am happy to enter.
I guess the market will bottom out as global pessimism tops out.
If you’re cashed up, secure, and ready to build wealth — this is the time to do it. Regardless of what is thrown at us, we humans are resilient creatures.
The virus will be defeated, and the show will go on.
Ben Graham: “Be the realist who buys from pessimists and sells to optimists”
Warren Buffett: “Be fearful when others are greedy and greedy when others are fearful”