No News is Good News
During the market downturn in 2008 everyone knew the markets were bad due to the extensive coverage in the media. Radio, television, newspapers, internet: everywhere you turned the media was letting everyone know that the sky was falling and the world would soon come to an end. But as you are well aware, the world did not come to an end. The economy has stabilized, markets are recovering, and it seems as though the worst is behind us.
In fact, in 2009, the S&P/TSX Composite Index (Toronto stock exchange), gained 30.7%, the best year for the index since 1979. And this huge gain was in spite of the fact that there was a massive decline from January to March. The S&P/TSX fell to 7479 in March, before astounding investors with a meteoric rise to a high of 11,816 in the fourth quarter, a rebound of 58%. The Dow (New York stock exchange) fell to 6547 in March, before climbing back to 10,428, a rebound of 59%.
But the majority of Canadians are unaware of these gains. A recent survey done by Franklin Templeton Investments found that 75% of Canadians did not know about the 2009 market rally. Since only a small number of investors knew that the market rose in 2009, a lot of them missed the benefits of last years surge. Investors who let their emotions rule their investment decisions and bailed out of the market in the spring lost their shirts. Those who heeded advice and held their positions had their patience rewarded and now stand a good chance of getting back to par and beyond.
In fact, not many people are aware that the downturn in 2001-2002 was worse, or historically speaking, that there were other downturns which were comparable to the one in 2008. In particular, over the past 70 years there have been 8 declines which averaged -43.5%. But the markets have come back each and every time with an average return of 41.7% in the first year of recovery and 121% over 10 years.
While the media hyped the bad news minute by minute, the improvements (and past history) in the market went largely ignored by them and ultimately by the average person. The media lives by the motto “if it leads it bleeds”, which is a statement about the media’s fascination with bad news. Good news does not sell. Therefore, the boring, logical, common sense perspective of a financial advisor was left out of the news while the doom and gloom perspective was thrown in your face, leaving the average person with a skewed outlook on the market and the future economy.
But we are here to reinforce the facts, remind investors of their financial goals, keep them committed to their long term plans, and ensure them that the apocalypse is not upon us. The key to meeting your long-term financial goals is education, patient perspective, and advice, which we are here to provide.