Three Charts

Today I want to present three charts.  The charts are of the S&P 500 ETF, SPY.  We use this a lot because it is a security that actually trades as opposed to the index.  The chart is from Tradingview.com, although the annotations are mine.  Also you can double-click on any of these to make them larger if you want.  The first shows the day after the 9/11 terrorist attacks and it's impact on the markets.  I am using the next opening day after that event because the exchanges were closed in the immediate aftermath.

The next chart shows trading on September 15, 2008 when Lehman Brothers filed for bankruptcy.  Lehman was the beginning of the financial markets implosion due to the housing crisis.  That event ultimately brought on the Great Recession.  BTW I don't know why we don't call it for what it really was which was a depression.  I guess we need to distinguish from the Great Depression of the 1930s. What we had a decade ago WAS a depression.  It was no run of the mill recession.

The final presentation is a current chart of the S&P 500.  Ignore the trendiness on the chart as they are not germane to what I want to discuss.

I want you to concentrate on just the closing prices on these three charts.  Of the two historical ones, ignore what you might know about what happened before or after these events.  Just concentrate on three numbers on three charts.  SPY closed in the opening day after the 9/11 attacks at 104.30.  SPY closed on the day that Lehman filed for bankruptcy at 120.09.  SPY opened this morning at 288.10.  In the seven years between 9/11 and Lehman's bankruptcy the S&P advanced a bit over 15%, not including dividends.  Now nobody is arguing that a compounded rate likely under 3% is anything to write home about.  Except consider that during that time we suffered an economic recession owing to the impact of the attacks and fought two wars in Afghanistan and Iraq.

Now consider this.  From Lehman's bankruptcy till today the market is up nearly 140%, again not including dividends.  That's a return over 14% in the intervening years.  If you had bought the market that day it wouldn't have looked like a good bet.  Stocks went on to lose nearly 45% of their value from that point till the market bottom in March of 2009.  However, if you had held on you made back your money in spades.  You made even more if you averaged down in the next six months or averaged up in the next few years after the market bottomed.

Equities are long duration assets.  You need to look at their returns in years not months.  Two of the events depicted above were both human and financial disasters.  Yet, the resiliency of the US economy is such that markets were able to find a level of value and then advance.  It happened in fits and starts and there were a lot of bad days along the way but nobody can argue with the long term results.

There will be a point again where stocks will again have a bad day and there will be periods of time when markets again make investors little to no money.  There are no guarantees in life other than what awaits all of us at its end, but the long term probability, now going back over a century and encompassing all sorts of good, bad and unimaginable events,  is that stocks will likely recover as long as the economy continues to grow.  The corrective forces and resiliency of our economy and the American people still make us one of the most vibrant economies in the world.  In the long run that likely means the potential for outsized returns over the years remains in place.

Remember these three charts the next time there's a bad day or a bad year.

God bless to those that fell these seventeen years past, those that responded that fateful day and those that have fought to make sure another day like 9/11 has not happened again.

Back Thursday.

*Long ETFs related to the S&P 500 in client and personal accounts.