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Stock Market Crash in 2008 – Will It Recover by 2010?

Economic RecoveryNobody can really predict when the stock market turmoil will peak, including the recession, but a chart and article from the Daily Kos gives us a quite legitimate starting point to guesstimate on when the economy is prospering (again.)

The S&P Market Index Chart

sp_from_1825From this chart, the block represents a year and the columns represent a range of return on the S&P index.

We can learn that in the middle column, those are the typical years where the market has risen from 0 to 10%. This bell-shaped chart looks ‘normal’ in economic situation, but have a look at the left-side of the bell chart – yes, there goes the year 2008, at -50% S&P market index change.

A certainly lackluster year, 2008 is as bad as the worst stock market crash in the history of S&P, back in 1931.

What does it mean? Welcome to one of the worst years in stock market history! Hopefully, the 2009 will not be the worst year of the stock market history. But, even if the record breaking happened, I still believe somehow that economic recovery is right on the corner.

How well do the government react to the fact?

The US government, through the Fed, are trying to do what they think will save the US economy – record breaking funding to save banking and financial institutions, such as AIG, from collapsing.

Although not the best possible solution, as I think doing so will eventually bury US economy deeper into recession – perhaps not today, but most probably in the near future, what the Fed did is arguably give much needed friction to slow down not only the US recession, but also global recession.

Are there still hope?

Well, the 1931 crash did followed by a big rebound in 1933, where the stock market achieved a 60% return. Will this also be the case, that the crash in 2008 will be followed by similar improvement in 2010?

Although highly inaccurate, hopefully such assumption will become a reality – the sooner, the better.

As I already stated in my previous posts, I think that the negative sentiments make global economic recovery slow, as financially and psychologically distressed people will likely to react in skepticism toward any efforts to recover the global economy.

So, I conclude that all is coming back to the media – what the media preach will affect the recovery process, as people will ‘blindly’ count on the media (including on the experts), rather than their own common sense and financial knowledge, to seek ways to quit recession.

Hopefully the media (including this blog) can affect the recovery in a positive way.

Image by Alan_D.

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8 Responses to “Stock Market Crash in 2008 – Will It Recover by 2010?”

  1. Francis Ouseph says:

    One fine day a wise man makes a sudden appearance at a village with an offer to buy monkeys for 10 bucks apiece. Since there are many monkeys around, the villagers start catching them from the nearby forest.

    The wise man buys the monkeys in thousands at 10 bucks each as promised. Since the monkeys have dwindled considerably by now, the villagers stop catching them. The wise man doubles his offer and pretty soon the villagers are chasing after the remaining monkeys. Soon monkeys are so rare that the villagers go back to their farms.

    The wise man buys the next batch of monkeys in hundreds for the 20 bucks as promised and makes a new offer of 25 bucks per monkey but free monkeys have become almost extinct in these parts by now. Still he manages to buy a dozen or so monkeys at 25.

    Now the wise man raises his offer to 50 ! The villagers try really hard but monkeys are nowhere to be found. Since he has to travel to the city to attend to an urgent business, the wise man authorizes a deputy to buy the monkeys on his behalf.

    In his absence, the deputy shows the villagers the huge cages holding all the monkeys that have been caught and bought till date.
    “Dear villagers, these are the monkeys that my boss has collected. I will give them to you at 35 apiece. By the time my boss returns, each monkey would be at least worth 70 bucks a piece; you can sell them back to my boss at a profit and double your money !”

    The villagers cough up all their hard earned money down to the last penny and buy back all the monkeys at 35.

    Then the deputy vanishes without a trace; the wise man is never heard of again in those parts. The villagers are poorer than ever but the nearby forests are rich with monkeys again !

    After many years…

    Another wise man makes a sudden appearance at this with
    an offer to buy monkeys for 10 bucks apeice. The impoverished villagers having forgotten the bitter past by now, rush into the nearby forest to catch monkeys…

    Welcome to the Stock Market !

  2. Stock Market Man says:

    Technical indicators would suggest a recovery well before 2010.

  3. Ivan says:

    Hi,

    Hopefully that would be the case… fingers crossed! :)

  4. money-saving-tips says:

    Another interesting article from your blog :) When will it stop….hopefully never

  5. Stock Trader says:

    Good article. What do you think about the current rally?

    It seems stocks are waaay over priced.

    Last week Prechter gave the short signal, just like he covered his short just before the March rally: He thinks March lows will not hold.

  6. Arjun says:

    I liked the monkey story, very true indeed.

    for a small investor, It is a better idea to wait for a market crash after waiting for 4- 5 years, then get 25-40% profit and wait for another term.

  7. Karen rodriguez says:

    I really liked your opinion! I look forward to more insightful info.

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