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b'March 9, 2009: The Day Stocks Bottomed Out
I wonder if any of my listeners, especially those active in the stock market, remembered the historical significance of last Thursday, March 9th, 2017??
Well, believe it or not, that day marked the eight year anniversary of when stocks bottomed out on March 9, 2009, the worst of the blood bath of the 2008 financial crisis, aka the 2009 bear market low.
But first, let\\u2019s first recap what happened. The 2007-2009 financial crisis spawned a 17-month bear market that lasted from October 9, 2007 to March 9, 2009. In that period, the S&P 500 lost approximately 50% of its value. While the decline was incredibly nasty, the duration of this bear market was relatively short due to the extraordinary interventions by the government and the central bank to prop up at-risk companies.
The bear market was confirmed in June 2008 when the Dow Jones Industrial Average (DJIA) had fallen 20% from its October 2007 high, which it reached after the heady bull market of 2002\\u201307 when property prices and stock values were on a tear.
On October 11, 2007, the Dow hit a peak of 14,198. before starting its decline.
The decline of 20% by mid-2008 was in tandem with other stock markets across the globe. On September 29, 2008, the Dow experienced a record-breaking 777.68 drop with a close at 10,365.45. It then hit a market low of 6,443.27 on March 6 of \\u201909, having lost over 54% of its value since the high of 2007. The bear market then reversed course on March 9, 2009, as the Dow rebounded in the next three weeks more than 20% from its low up to 7924.56 and then it went up 30% by mid-May and over 60% by the end of the year.
Interestingly, when stocks bottomed out that day eight years ago\\u2014amidst fear, doom and gloom\\u2014The Wall Street Journal\\u2019s Money and Investing section ran a story with the title, \\u201cHow low can stocks go?\\u201d
And, back then, it wasn\\u2019t an idle question. The Dow was on its fourth straight week of losses, while the broader S&P 500 was below 700 for the first time in 13 years. Goldman Sachs put out a research report that warned that the S&P could fall as low as 400. Imagine that! Goldman Sachs, the ultimate insider on Wall Street, was so gloomy on stocks and completely misread the tea leaves and predicted a further 40% drop in the S&P from its 700 level. Stunning!
So, eight years ago, on March 9, 2009, the Dow closed at 6,547, the S&P 500 was at 677, and the Nasdaq closed at 1,269. Fast forward to March 9, 2017 and the Dow closed at 20,858, up almost 220%, or about 18% a year on average. The S&P 500 is now near 2,365, up 250% or about 19.6% per year; and the Nasdaq is near 5,840, up the most with a gain of 360% or about 24% per year. That\\u2019s a pretty phenomenal bull market.
Now, eight years later, we know without a doubt that March 9, 2009 was the bottom of a months-long financial panic that wiped away trillions of dollars in assets. But on what now appears to have been the best buying opportunity of a generation, many only wondered how much lower the markets would tumble. And this underscores a recurring theme I point to: That emotion, fear, and uncertainty get the better of even the most experienced and qualified investors in the market. That it\\u2019s futile to try and call the bottom in real-time, and that investors should always look for dips as long-term buying opportunities on good quality stocks.
I was an investment advisor, of course, during that period of time, and on March 9, 2009\\u2014I remember like it was yesterday\\u2014I would not buy on that day. As a fiduciary, legally in charge of other people\\u2019s money, I thought that the economy was too worrisome to commit clients\\u2019 funds. But by May and June or so, I started to feel more confident and waited for the confidence to come back into the market and then I started to come back in.
Looking back, everywhere you turned on that March 9 day in 2009,'