This Stock Market Crash Isn’t ‘Different’ – You’re a Fool to Think Otherwise

  • History suggests the stock market crash hasn’t reached a bottom yet.
  • Investor sentiment points to greed driving this rally, not fundamentals.
  • The nature of the coronavirus pandemic will keep investors from seeing a clear picture of the future.

As Dow Jones Industrial Average (DJIA) futures ticked higher on Wednesday morning, investors breathed a sigh of relief. Two days of declines had many wondering whether another stock market crash was on the cards.

Despite worrying economic data and worse than expected quarterly results, bulls are soldiering on with claims that we’ve already seen the worst of this stock market downturn. But that could be dangerous thinking.

Bulls claim we’ve seen the bottom of this stock market dip, but history and logic tell us otherwise. | Source: Yahoo Finance

Past Stock Market Crashes Show Patience is a Virtue

The Fed’s unprecedented stimulus has many investors claiming that comparisons to past bear markets aren’t useful. “You can’t fight the Fed.”

But fund manager Mark Mobius offered overzealous investors some sage advice in an interview with Yahoo Finance.

The most expensive words in the world are ‘This time is different.’ I don’t think this time it’s different.

Data compiled Morningstar research director Paul D. Kaplan shows that the stock market has been suffering through a bear market (a 20% decline or more) just about every nine years.

The good news is that the market has always recovered and investors who were able to wait it out ended up back in the black. But for investors who don’t have years to wait for their investments to recover, it’s useful to consider what history says is going to happen next.

That’s where the bad news comes in. Looking at the 17 stock market crashes that Kaplan analyzed, the market tended to take about two years to reach a bottom.

In the past, the stock market has always recovered– but never quickly. | Source: Morningstar

Kaplan notes that the steep initial decline…

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