What to expect in a stock market recovery

What to expect in a stock market recovery

There is an adage in sports, “Pressure is something you feel when you are not prepared.” While preparation does not eliminate all pressure, the sentiment holds truth. It is why coaches run drills and push players in practice. They do not want the pressures of competition to overwhelm players in the moment they need to perform their best. Financial planning is about preparation too.

In our March post, Decision making in the face of uncertainty, we pointed out when the market goes down, “…the only sellers who would be happy were the few who sold before the market bottomed, and IF they bought again at a price lower than the time of sale, and IF they didn’t get scared out of the stock market in the future.”

It is that last IF we want to prepare you for. If the market is recovering, why would people get scared out of it?

When a recovery starts, there is no bell which rings, or announcement made that the market has hit bottom. To the contrary, the markets just rise even though the news at and after the bottom is predominantly negative.

Well, one of the culprits is that market recoveries feel a lot like declines, since there is a lot of negativity in the news. When a market recovery starts, there is no bell which rings, or announcement made that the market has hit bottom. To the contrary, the markets just rise even though the news at and after the bottom is predominantly negative.

Vanguard produced an illuminating chart which we share below. It is not the easiest to read but the chart concurs with what we talked about in Why and how markets recover. As the headlines in the chart suggest, it was anything but easy to stay invested in 2009 and receive the full benefit of the recovery. We had our research team look a little closer.


Hypothetical $1 million investment in Standard & Poor’s 500 Index at pre-crisis peak, from market bottom in 2009 to breakeven in 2011. Source: Vanguard. Note: See below for a list of complete citations to the articles cited.

When the first headline in the chart ran on March 18, 2009, “Fed plans to Inject another $1 Trillion to Aid Economy,” the market had already risen more than 17% since the low on March 9 for no apparent reason. This Fed intervention was not viewed as good news and the S&P fell 3% over the two days following the announcement. See that tiny little drop a few days after the aid package announcement but before the next highlighted headline about the job losses? It looks tiny but was not. In 2020 terms, it is the equivalent of a 1,000+ point fall in the Dow Jones Industrial Average in just two days.

Move onto the next headline on October 2, 2009, “Jobs Report Highlights Shaky U.S. Recovery.” At that point, the market was up about 52% from its low point. The news however was not good. The article points out this was the 21st month of consecutive job losses, the longest streak in 70 years and the unemployment rate was up to 9.8%. That dip you see was another attention-grabbing drop of nearly 6% in a few days.

The first seven months of the stock market recovery was very strong, but the economy was not, hence the word shaky in the headline. Other popular words to describe the market’s recovery were: “false,” “feeble,” “fragile,” “tenuous,” and “doomed.” These negative headlines appeared virtually every day – any one of them capable of worrying someone out of the market. The economy was awful.

Of course, sometimes the markets would drop without any obvious bad news. The chart highlights no headline but in three weeks starting in the middle of January 2010, the index dropped over 8%. At this point, less than a year from the market bottom, plenty of pundits were saying we still had not seen the worst and the impressive rally was an illusion. The government had been “printing money,” the deficit and debt were at record highs, inflation was coming, and interest rates HAD to rise, causing losses to bonds.

Debt was an oft-cited concern, both governmental and private. How can we afford it? How can people pay their debts when there are so many unemployed? With so much real estate “underwater“ (mortgage balance exceeds value of property), foreclosures will send the banking system into the abyss. These were reasonable questions to ask about bad situations and the awful outcomes seemed plausible, even probable.

As the headline, “U.S. home foreclosures reach record high in second quarter” suggests, many of the concerns came to fruition. For instance, the chart does not highlight a headline about it but in late April 2010, the index dropped 16% in just 10 weeks, roughly a 4,000 point drop in the Dow today. The apparent culprit was the high debt levels of several European countries and a bailout of Greece.

Concern, negativity, and frightening headlines is normal during a decline but … it is also normal during a market recovery…

The entire time period illustrated was full of negative messages about the economy and the direction of markets. Concern, negativity, and frightening headlines is normal during a decline but what needs to be realized is it is also normal during a recovery and even during an advance.

This chart ends in early 2011. The next nine years were good for stocks, but those years were not uneventful. The market’s advance had several significant drops in the ensuing years, some accompanied by dire headlines. In 2011, those debt concerns resulted in the credit rating of the U.S. being downgraded for the first time, sending stocks down nearly 20%. The market dropped by at least 5% in nine of the ten calendar years from 2010-2019 and by at least 10% in six of those years (source: Dimensional). The headlines around each of these drops, all decidedly negative and even frightening, included nuclear accidents, tsunamis, tensions with North Korea and “trade wars.”

This Coronacrash presents the latest example of why one should not make investment decisions based on headlines or news. Since the low point on March 23, when the chances of panic selling were high, there has been very little positive economic news. The rate of job losses has been unprecedented and as of the time of this writing, the U.S. has an unemployment rate not seen since the Great Depression. Yet the S&P 500 index, while down substantively for 2020, has risen over 30% from its March 23 low.

While that quick spike is consistent with other recoveries, the roads to full recoveries have been bumpy. You should expect this one to be as well.

While that quick spike is consistent with other recoveries, the roads to full recoveries have been bumpy. You should expect this one to be as well. It is not hard to imagine a scenario where the market reacts badly to bad news. Nor is it difficult to create some possible headlines like, “The curve is no longer flat. Covid infections spike” or “Promising vaccine fails trials.” The size or timing of the next drop may be surprising, but the existence of that next big drop should not be. Significant drops and scary headlines are the norm, not the oddity.

Is March 23 the bottom? No one knows but true investors do not need to speculate about the answer. They simply need to remember Why and how markets recover, focus on what they can control (including their intake of news), and stay diversified, disciplined, and patient. Resilience has proven to be more effective than nimbleness in the past and we see no reason it will not win out this time too. We hope this preparation helps when the pressure is on.

It is understandable to have concerns about market volatility and its effect on your portfolio. The situation in the markets is certainly different this time. However, so far it follows a pattern we have seen many times before and have successfully navigated over the years. Bottom line: The “right time” to invest is usually now, whatever the markets’ performance or news headlines might be. By all means, if you have questions or concerns about the plan we created to help you reach your financial goals, please contact us.

Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.


Andrews, Edmund L., 2009. Fed Plans to Inject Another $1 Trillion to Aid the Economy. The New York Times (March 18). Accessed March 24, 2020, at https://www.nytimes.com/2009/03/19/business/economy/19fed.html.

Goodman, Peter S., 2009. Jobs Report Highlights Shaky U.S. Recovery. The New York Times (October 2). Accessed March 24, 2020, at https://www.nytimes.com/2009/10/03/business/economy/03jobs.html.

Goodman, Peter S. and Jack Healy, 2009. 663,000 Jobs Lost in March; Total Tops 5 Million. The New York Times (April 3). Accessed March 24, 2020, at https://www.nytimes.com/2009/04/04/business/economy/04jobs.html.

Lazo, Alejandro, 2010. U.S. home foreclosures reach record high in second quarter. Los Angeles Times (July 15). Accessed March 24, 2020, at https://www.latimes.com/archives/la-xpm-2010-jul-15-la-fi-foreclosures-20100715-story.html.

Lobb, Annelena, 2009. Dow 5,000? There’s a Case for It. The Wall Street Journal (March 9). Accessed March 24, 2020, at https://www.wsj.com/articles/SB123654810850564723.

Luhby, Tami, 2010. Fannie to U.S.: We need another $15.3 billion. CNN Money (February 26,). Accessed March 24, 2020, at https://money.cnn.com/2010/02/26/news/companies/Fannie_mae_results.

Milmo, Dan, 2011. US economy and international stock markets start year with optimism. The Guardian (January 3). Accessed March 24, 2020, at https://www.theguardian.com/business/2011/jan/04/us-economy-buoys-international-markets.


Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

 Contact Us

Moisand Fitzgerald Tamayo, LLC is an Orlando, Tampa and Melbourne, Florida based fee-only financial planner serving central Florida and clients across the country. Moisand Fitzgerald Tamayo, LLC specializes in providing objective financial planning, retirement planning, and investment management to help clients build, manage, grow, and protect their assets through all phases of one’s life and the many transitions in between. If you have any questions or would like to discuss anything further, please give us a call or send us a note. If you are not a client and wish to receive emails notifying you of new posts – no more than once per month – fill out the subscription information in the sidebar to the right. For more frequent updates, follow us on FacebookLinkedIn, or Twitter.  

Important Additional Information & Disclosures

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Moisand Fitzgerald Tamayo, LLC-“MFT”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. 

Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from MFT. 

Please remember that if you are a MFT client, it remains your responsibility to advise MFT, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MFT is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. Tax advice is given only to clients and only when agreed to by MFT. A copy of the MFT’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request.

Please Note: MFT does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to MFT’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Please Note: Limitations:  While MFT does NOT pay for recognition, awards, or publicity, neither rankings and/or recognition by unaffiliated rating services, publications, or other organizations, nor the achievement of any designation or certification, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if MFT is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers. No ranking or recognition should be construed as a current or past endorsement of MFT by any of its clients.  ANY QUESTIONS: MFT’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including providing the criteria used for any reflected ranking.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your MFT account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your MFT accounts; and, (3) a description of each comparative benchmark/index is available upon request.


About Dan Moisand

Dan Moisand is a fee-only financial advisor with Moisand Fitzgerald Tamayo, LLC. He is a regular contributor for multiple outlets, including Florida Today, MarketWatch, and The Wall Street Journal. His writing and financial advice have also been featured in Financial Planning, Investment Advisor, Wealth Manager/Advising Boomers, Forbes, Smart Money, and The New York Times, among other publications. He is the only two-time winner of the Journal of Financial Planning’s “Call for Papers” competition and has been named a top financial planner and advisor by multiple publications. Investment News named Dan one of the “twenty most influential men and women” in the history of financial planning. He currently serves on the Board of Directors for the CFP (Certified Financial Planner) Board.


As a Sanctuary From The Noise®, we only post information we believe timely and important to the long term financial success of our clients. Follow us to receive emails - no more than once a month - about new posts.

We keep your information private and make stopping our emails as easy as starting them.

Something went wrong. Please check your entries and try again.