posted by: Radnor Financial Advisors
On March 15th, 2020 the longest bull market on record ended as the coronavirus pandemic halted the economy. We experienced the quickest drop into a bear market in history – 16 days. The S&P 500 then continued to decline, falling about 34% from its February peak to its low on March 23rd. Despite the unprecedented job losses, growing infection rates, and unimagined death toll, we then experienced the quickest market recovery in history (and now up 79% from the March 23rd low). In the span of less than 6 months, we went from market peak, to a sharp bear market drawdown, to new highs. Financial markets are forward looking, and the recovery reflected expectations that the future would be better.
Looking back, 2020 reminds us of an important lesson, that markets are difficult to time. Markets recovered very quickly, with the S&P 500 up 17.6% over a 3-day period in late-March. While being invested in February and March was uncomfortable, it was important not to panic and remain disciplined in order to benefit from the recovery. Remember, no bell rings when markets are about to decline nor when they are about to recover.
As we consider 2020, it is important to recognize the swiftness of both the decline and the recovery were atypical. Usually it takes more than a year to experience a bear market and a couple years to recover. When you prepare yourself for future market cycles, you need to recognize your patience will likely be more severely tested, as recoveries usually take more than a few months.
Thus far in 2021, the markets have been mostly positive, although we have seen ups and downs. We are still in the midst of the pandemic, but vaccinations are being administered and there is a sense of hope on the horizon. While the economy re-opens, fiscal and monetary stimulus continue to provide support. In this environment, we continue to encourage investors to look past short-term market noise and focus longer-term, remaining patient and maintaining a diversified portfolio.
As we moved our clocks forward over the weekend, we are hoping that we can also move back toward a more normal lifestyle environment as 2021 progresses.