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What Markets do AFTER Negative Return Decades

September 06, 2009 | About:
Schaeffer's Investment Research says that....

"Susequent to the previous 21 negative decades (on a rolling one-year basis since 1900) the market was higher 70% of the time over the following one, three, and five years, and was higher 100% of the time over the following decade. Market returns over these periods were, on balance, better than average."

Rating: 4.2/5 (5 votes)


Batbeer2 premium member - 7 years ago
What exactly does this prove ?
Dr. Paul Price
Dr. Paul Price premium member - 7 years ago
It doesn't prove anything, but it does lead to the idea that good performances almost always follow disastrous ones like like just finished last March 9th.

When the mood was bleakest and everyone was calling for nothing but the next Depression-- the perceived risk was very high but the actual risk was quite low.

Evan - 7 years ago    Report SPAM
The false patriot is right on this point. If we're talking about market risk then the risk would have been very low. Government intervention into the economy also made fundimental risk lower, though it was still high.

The risk to the economy was high because, as Buffett said, we were very close to having the entire economy grind to a halt. Buffett said that if the government had not acted he would have been pulling money out of investments he had made. After October 2008, after the government saved the nation, there was still the chance that the political leaders (including the FED) could have mistepped and not prevented a very large crisis. The economy could have fallen off a cliff, which would have made for very large captial losses (or medium/long term paper losses).

I think the biggest fundimental risk that the economy faced was in October, and then the risk was reduced as the government responded. Now there is still some risk, but its very low. The greatest risk now is inflation and what effect higher interest rates will have on homeowners, the banking industry and consequentally the rest of the economy.

As far as risk goes,if we're talking about price risk and holding fundimental risk constant then Doc is right that the risk was very low.

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