This one chart...the great recovery

In investing, what is comfortable is rarely profitable - Rob Arnott

At every market collapse investors never fail to draw comparisons to that of 1929. Manufacturing narratives as why this collapse will be equal to or worse than that of The Great Depression.


In today's chart we look at the pace and magnitude of the COVID stock market recovery and compare it to the collapse and subsequent recovery of 2018, 2009, 2003, and 1987. Each recovery is rebased to 100, which represents the bottom of the market for each collapse/recovery.


What we can see from all five market collapses is that once the bottom of the market was cemented, the market continued to climb for at least 12 months following the bottom. I don't know whether today's market recovery will continue at it's current pace or not, but history and the odds are certainly on our side. In fact, the 2020 recovery looks remarkably similar to that of 2009 - and we all know how that one unfolded. If history is anything to go by, this rally has a while to go.

Investing is unlike anything else - it's counter intuitive. When everything in your gut is telling you to pull the pin during times of crisis, or in fact to load up during times of euphoria, the average investor, is generally wrong. It comes back to basic human emotions - fear and greed.


From tulip-mania to almost every stock market bubble and subsequent collapse, human emotion takes over one's decision making. Modern history tells us stock markets recover - some just take a little longer than others. The point at which you are likely to make the most money, is precisely the point when the crowd is headed for the exits. Don't catch a falling knife they say - yet no one rings the bell when the knife hits the floor.


How many times do investors need to go through the same lessons before they learn the principles. There's no room for pride in this game. Understand your strategy and see it through.

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