Yet it’s best not to underestimate how fragile and unconvincing this economic and asset-market recovery seemed along the way — and therefore how hard it often was to maintain the faith that over time the market will bail out investors’ imperfect timing.
The S&P 500, which bottomed at 666 on the afternoon of March 6, 2009, spent very little time under 800 — no more than five weeks in total. Yet it’s climb from there back toward pre-Lehman levels was fitful and slow.
Not quite a year after Lehman and five months following the market bottom, the S&P had pushed back up to 1000, yet it was still common to view this as a “bear-market rally,” with the scary, doomed path of the Great Depression market on many minds.
Renowned hedge-fund trader Paul Tudor Jones had this to say in August 2009: “Impressive counter-trend rallies are a feature, not an oddity, of secular bear markets, we are not inclined to aggressively chase the market here. Many doubts remain about the sustainability of this recovery, most prominently the weakness of household income growth.”
At the three-year market, the S&P 500 had just about recovered its post-Lehman losses, but stocks had still lagged the return of bonds since the crisis and the European debt crisis threatened a global financial crisis relapse.
Here’s how the Los Angeles Times summed up the situation in August 2011: “RIP, bull market? Unless stocks reverse quickly, Wall Street statisticians will mark April 29 of this year as the end date of the bull market that was born in March 2009, in the depths of the last recession.”
By the five-year mark, things seemed on firmer footing: The S&P 500 had been making new record highs for months, profits were surging, Silicon Valley humming, banks on sturdy footing. And that was exactly when the worry turned toward whether the Fed might spoil things by starting to tighten policy too soon or quickly.
Through all those years of worry, the market fought its way to a respectable performance even for those who bought on the precipice of unprecedented financial calamity.
How far have we come? It’s no longer a moment to ask “Is all the bad news in the market and in front of our noses?” but rather, “Things are so obviously good, how has the market not captured it all?”
For the record, in September 2008, the first question was exactly the right one to ask. Acting on it aggressively proved premature and humbling for a good long while, but not wrong.