There’s no denying we would never have anticipated the duration and the depth of pain we have seen in the stock market. And at this point I think seeing another drop of 10 to 20 per cent is not out of the question.
For seniors, nervously watching a decline in their retirement savings, I know this is not what they want to hear. But there is hope, since a long, arduous recovery, I believe, is not in the cards.
Many economists anticipate that another bull market is just around the corner and the decline in your portfolio will not last long. This crisis is not like any other we have witnessed in the past and I would caution new investors against using traditional stock market measures to try to time a market entry.
When we first experienced the effects of the coronavirus on the stock market, together with the oil crisis, we witnessed an explosive downturn that was unprecedented, and in some respects, unexplainable.
We all know the market is very aggressively reacting one way or the other, but most economists believe we will see it go up just as fast as it declined when the market does turn.
The recovery will need to go through a few clearly defined stages. Initially we should see a defensive market reaction to change for approximately four to six months, followed by a market recovery of 40 to 50 per cent that will take 12 to 18 months.
Only after this stage will we begin to see the beginning of our next bull market, which is predicted to last three to five years. There is no doubt we will see the market reach higher highs than we ever anticipated a few months ago when the market was calm and just ticking along before the coronavirus pandemic.
Unfortunately, “you only know what you know,” as they say, and “you can only control what you can control.”
The impact of this virus will be what it is, and we will come through it. If history has shown us anything, it is that this crisis, like all others, will pass and we will come out of it stronger and more resilient than before.
— Christine Ibbotson is author of Don’t Panic: How to Manage Your Finances and Financial Anxieties During and After the Coronavirus and How To Retire Debt Free & Wealthy. She also writes the Moneylady column.