Monday, June 22, 2009

Recession of 2007 - 2009 Compared with Others

I thought it would be interesting to compare the current recession we are in to the average recession in the the last 25 years. Recession's are normal cyclical events that happen on average every 7-8 years or so. Although the media often blows things out of proportion, without recessions, we would eventually have bubbles in every market, which would eventually collapse, causing a much more severe event, called a depression.

In the last 15 years, not counting the last 2 which are part of the current recession, the average recession lasted only about 8 months. The current recession we are in right now, however has lasted over twice as long, at 17 months and running. With any recession, there is a bear market as well. The average bear market between 1983 and 2007 lasted 1 year (12 months). The current bear market that we just saw lasted 19 months. The bear market is over, at least for now, but the recession has yet to officially be declared over, and likely won't be for some time to come. Even if the recession is over, it will take about 4-5 months to determine that for a fact.

Despite the negativity of it all, there is some good news. The bear market appears over, thus we are likely at the start of a bull market run. A bull market, unlike it's evil twin brother, the Bear market lasts on average about 4 years or about 49 months. Since we are starting at such a low base, it is likely this bull market will be stronger than most. The average Bull market can show returns over 100%, with one third of that gained within the first 12 months. The lesson of this is that despite all the negative media over the last 12 months or so, things probably won't be as bad as most experts were predicting, and the great thing about it is that if you have cash on the sidelines, and a little risk to bare, now is an amazing time to invest in the market with a long term horizon.

1 comment:

Anonymous said...

Thanks for sharing such great post, it will give knowledge to many people. For more details on recession refer

Post a Comment