Happy Birthday to You

March 11, 2014

March 9, 2009 was a rough day for most of us.  U.S. markets had fallen by over half in the preceding year, and bad news was hitting the airwaves daily.  Bankruptcies, mass-layoffs, rising homelessness and foreclosures were commonplace month after agonizing month.  In a way it seemed like it couldn’t get any worse, yet at the same time, it also felt like it just might get a lot worse.  That was five years ago Sunday (3/9/14), and it was also the bottom of the last bear market.  It’s been going up since.

As we pass this five-year anniversary, how far have we actually come from those dark days of the past?  Consider the following data points from March 9, 2009 to March 9, 2014 (Source: Bespoke Investments as of March 9, 2014):

  • The S&P 500 is up 174.76% or 1,195.72 points.
  • The Dow Jones Industrial Average (i.e., The Dow) is up 151.73%.
  • The S&P Small Cap 600 and The S&P Mid Cap 400 were up 273.82% and 242.02%, respectively.
  • The consumer discretionary sector was the top performing sector, up 325.70%.
  • The Telecommunications sector was the weakest performer, up 67.78%.
  • The Chinese Shanghai Composite is down 2.87%.

Do you remember all of the calls for “the death of the consumer”?  How could the consumer recover from a once in a generation housing bust?  How could consumer-oriented businesses survive with such high unemployment?  While these fears seemed reasonable at the time, they were dead wrong.  Do you remember the talking heads on TV telling you that markets might not recapture all-time highs for decades?  I do.  Yet, here we are, near all-time highs five years later.  So much for conventional wisdom.

Even though I’ve been in this business for quite a while, statistics like this and the psychology behind them continue to amaze me.  They repeat over and over.  One of the most shunned sectors in the market after the crisis, consumer discretionary, became the best performer five years later.  The higher yielding and “safer” telecom sector became the worst.  The exact opposite of what the consensus expected actually happened.

So, as we pass this 5-year anniversary and sing “Happy Birthday” to Mr. Bull Market, we have an opportunity to take stock of where we’ve been and to appreciate where we are.  We also have the opportunity to take a moment to reflect on the data and our own emotions of the past 5 years.  It’s been quite a ride!  Happy birthday, Mr. Bull!

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