What Were You Doing Two Years Ago? A Stock Market Post-Mortem

Do you remember what you were doing 2 years ago today?  For most people there was a lot of hand–wringing and much worse as the stock market was cratering again to new lows ...

I remember one client in particular who called me to say she was going to liquidate her entire portfolio … she just couldn’t take it anymore.  She had been advised to do so by her CPA.  As you all l know I don’t manage money any longer, but I do help clients in selecting their financial advisers as just one part of our work together.  Given my 26+ years of watching markets and having lived through some past very dark market days, I recognized this as a sign.  A sign that things were about to turn for the better …

Had my client sold everything that day she would have realized losses in the neighborhood of $2.5 Million!  And no matter what dollar-size your portfolio was, at that point in the market, most people were down anywhere from 50 – 70% in market value.   Painful? Yes, Excruciating!

Fortunately I convinced my client to hang on for just one more day (take a very deep breath) and to see what tomorrow would bring … then decide.  The positive outcome for my client was that today she is not still digging herself out of a very big hole, as would be the case had she capitulated to the fear-mongering. All due respect but CPA’s are not by professional training “market experts”; their realm is “taxes”, and of course, there is the occasional exception, but confusing market savvy with tax knowledge is not a good idea.

So what’s the moral of the story? …

Well here we are two years later and the market as of a few weeks ago had climbed a whopping 92% since that watershed event.  The scare of a lifetime turned on a dime into one of the longest running market advances seen since the post-'29 Crash recovery. 

I can’t tell you exactly how I knew - we’ll chalk that up to having studied people’s financial behaviors for a quarter of a century – but I knew this client's experience, including the equivalent of listening to advice from your cab driver, was the sign. Kind of the inverse way of recognizing when a bubble is forming in the market.  I also knew that I believed in the United States and the future prospects for businesses here, which after all is what the stock market is all about.

So tell me:

What did you learn from the crash and recovery?  And will you remember those ‘take-aways’ and new habits you quickly developed  - like putting away your credit cards – now that the chaos has been vanquished and normal market activity has been restored?  
 
Let’s hope so!