Your Money Minute with Dennis Staaland

The future of the stock market

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Curious about the future implications of today's market turmoil?  Let's take a look at the stock market meltdown we've been experiencing over the last nine months and put it into perspective over the long term.

From December 1972 through December 2008, there have been 6 downturns of the S&P 500 characterized by at least a 15% decline.  All six of these market lows saw a dramatic recovery within three years.  The average low was -32% (from peak to trough based on monthly returns) and the average three year recovery was 72.4%.  We don't know if this market has finally bottomed out, but history suggests that the subsequent upswing will probably be large.  Don't make the mistake of waiting for the market to recover its losses before getting your money back in.  The market may recover moderately this year, but 2010 and 2011 will be crucial for long-term investors.  

Because this market downturn has been more severe than any in recent memory, many people are making comparisons to the Great Depression. You should know that we are nowhere near the economic meltdown of the 1930s and more importantly, we are not expected to approach those numbers.

The number one issue for the consumer today is faith in the economy; consumer confidence is currently at an all time low. As a consumer, you can help by slowly returning to your previous spending habits, as much as possible, and believe that the economy will recover.