I hope I’m not jinxing anything, but I wanted to share some thoughts now that the recent market downturn seems to be behind us.
The signs continue to improve. While the situation isn’t perfect yet, things are moving in the right direction.
Below is a graph of the return history of the last four major downturns. It has been thirty-seven days since the market bottomed out on April 8th. Each graph extends this same number of days from its respective low and 281 days back, which is the number of days between the peak to trough in 2022.
There are two general types of downturns:
The tougher ones (shown on the left side of the chart) tend to cut deeper and take longer to recover. The good thing about these is that we usually get some warning signs before they happen.
The sudden, unexpected drops (shown on the right) occur quickly and feel just as scary, but thankfully, they often bounce back more rapidly. Unexpected events usually cause these. Once investors realize the worst-case scenarios are unlikely, the market starts to recover.
The encouraging news is that this time, our recovery is looking a lot like what we saw after the pandemic drop, but even stronger. We’re already above where we started before the starting point, even though we haven’t hit a new all-time high yet. That’s a great sign.
I can’t say with certainty that we’re fully out of the woods. The impact of the recent tariff situation may still linger, and there is a chance of a recession or a resurgence of inflation. However, the odds of those risks appear to be decreasing.
I’m proud to say that all of you stayed calm during this period, which made a big difference. This downturn reminded me a lot of the early days of the pandemic—uncertain, unpredictable, and uncomfortable. And just like back then, the best move was to hang on and ride it out.
Now, the signs of recovery are getting stronger. More and more stocks are rising, and even the smaller or weaker ones are joining the rally. That’s what we want to see: a broad, healthy recovery. Ideally, more stocks are close to their highest prices of the year, and a shrinking number are well below their highs. That’s the direction we’re heading.