It's the one thing on almost everyone's mind. With COVID-19 cases on the rise and the stock market in a tailspin, advisors and clients alike are wondering when everything's going to get back to "normal". Even the passage of the CARES Act, the $2 trillion dollar stimulus package, wasn't enough to bring a glimmer of hope to the market. The pandemic has cut deep into the global economy - extending across cities, states, nations and continents - to the point where many companies are struggling to stay afloat.

We've said it before and we'll say it again. We're living in unprecedented times and no one can predict the future. We don't know when the market's going to bounce back, nor do we know how low it will go. We can, however, look to the past to try to understand what may be ahead. According to Yahoo Finance, it took the 2008 bear market over four years to recover - or 1,100 trading days. That said, we're still left with the same question - when will the market bottom out?

If we look to data compiled by Howard Marks, co-chairman and co-founder of Oaktree Capital, we should try not to get overly excited if we see a substantial rally soon. In a Wall Street Journal memo, Marks draws on data based on the previous two bear markets, showing that initial comeback rallies probably won't last. “The first and second declines were followed by substantial rallies...which then gave way to even bigger declines."

One reason may be because passive investors typically don't look at their portfolios during market downturns - until they get quarterly paper statements in the mail. Millions of investors own 401(k) and index funds, and they generally ignore the market. According to a Banyan Hill article by Michael Carr, "As stocks fell in 2008, advisers were telling passive investors to buy the dip. And there was a brief rally each quarter. When losses became too large, they sold." Carr proceeds to share a chart that highlights 2008 and the first half of 2009 - showing the midpoint of the first month of quarter, when many investors received their statements. Reacting to a market decline of more than 20%, many investors panicked and sold - creating the final panic of the bear market.

What's an advisor to do?

To help put market fluctuations in perspective, we created a simple graph showing S&P 500 returns from 2001 through March 2020. You can download it here. And when you're ready, call us at 866.866.7050 to get out-of-the-box sales concepts and tax-savvy strategies designed to "stop the bleeding" without sacrificing market growth potential.

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