4 Key Crisis Events That Didn’t End The World

Last week’s referendum in the United Kingdom to leave the European Union created some immediate and potentially longer-lasting financial damage to the markets. According to CNBC, more than $2 Trillion in paper wealth was gone by the end of last Friday. Not good.

But we’ve seen these “crisis events” many times before. Typically, investors bail out at the first sign of trouble, and cause a big downturn in the markets. But the question we were asking was this: what happened AFTERWARDS? For the answer, we went back and took a look at some key crisis events in American history, and the results might surprise you.

1. 1941: Pearl Harbor

After the attack on Pearl Harbor in 1941, the S&P 500 lost 7.5 percent over four days. One month after the end of the crisis period, it was back up 2.1 percent. And one year later, it was up another 15.8 percent!

2. 1962: The Cuban Missile Crisis

How about the Cuban Missile Crisis? Yeah, the threat of a global nuclear war caused a few shattered nerves. Over a two-month period from August to October of 1962, the S&P dropped 9.9 percent. But one month after that crisis ended, it was back up 15.5 percent. One YEAR afterward, it had gained 41 percent. And five years after it hit bottom? The S&P had seen a 15.8 percent annualized gain.

3. 1987: Stock Market Crash

Let’s go back to the 1987 stock market crash. Over the course of 17 days, the S&P dropped an astounding 31.5 percent. The world was ending, right? Wrong. Just one month from the crisis low point, it gained 7.1 percent, and after one year, the gain had climbed to 27.7 percent.

4. 2008: The Collapse of Lehman Brothers

More recently, in 2008, we saw the collapse of Lehman Brothers. In a little over two months, the S&P was down a whopping 39.1 percent. But what had happened after one month from that crisis low point? We saw an 18.3 percent gain, and going out one year, the S&P was up 48.8 percent. After five years, the market saw an annualized gain of 21.5 percent.

Okay, you get the picture. We saw similar patterns after the Kennedy assassination, the Soviet Union invading Afghanistan, two Gulf Wars, the September 11th attacks–the list goes on and on.

The point here is that large, sudden market downturns happen, and there’s nothing we as individuals can do to stop them. But we can control our reactions to them. You simply cannot time the markets. Historically, the US stock market has always recovered from short-term crisis events and moved higher over longer periods of time. Acting rationally during irrational times, and sticking with a strategy instead of reacting emotionally by staying invested when others are selling may help to keep your portfolio on track to meet your long-term goals.

And remember – if you’re concerned, worried, or even a little panicky over what’s been going on over the past few days, just give us a call, schedule a meeting, and we’ll help you out. It’s why we’re here.


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