Recovery Will Be Swift When It Comes
We're not predicting the timing, but the magnitude

From a market perspective, the best part of 2008 is that it’s over.

Fortunately, there is reason for optimism. History tells us that severe declines occur periodically as part of the normal market cycle, and that losses, which always feel substantial (and occasionally are), have always been followed by dramatic recovery.

Consider this chart which shows the performance of bull markets (periods of rising prices) versus the performance of bear markets (declining markets). Although past performance does not guarantee future results, historically, prices rise substantially and for long periods during bull markets, while declines, by comparison, are mild and brief.

(click for larger image)

Although anyone who examines this chart will conclude that the best time to invest is when you’re at or near the bottom of a bear, the chart does not answer one nagging question: When will our current bear reach its bottom?

The chart doesn’t give us an answer, but we can find one by comparing the performance of the stock market to economic recessions. Consider the Wilshire 5000 Stock Index* during the last four recessions (which ended, respectively, in 1980, 1982, 1991 and 2002). From each recession’s market low, according to Dow Jones & Company, the Wilshire 5000 rose an average of 30% within six months — and, according to the National Bureau of Economic Research, prices began rising an average of four months before the recession itself ended. Investors who sell now, thinking they’d rather wait for the economy to recover before investing again, are almost certain to miss much of the stock market’s recovery.

So, as long as you hold a diversified portfolio, such as those offered by the Edelman Managed Asset Program®, just hold on to your shares.