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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.

Eventually, How You Survive the Recession Depends on Your Financial Intelligence

MoneyI once asked by my reader in my other blog – When do you think the recession will end, and how?

I really am having a hard time to answer the question. So may opinions from experts and public, as well.

To tell you the truth, I can’t imagine how the recession will end, and when will it eventually ends.

Some experts say that the recession will peak within 2 or 3 years, and things will improve gradually from there – so, rough road ahead.

Regarding how the recession will end, here’s an interesting estimate – According to this article, the average recession lasted for 10.8 months. Therefore, according to the data, on average, the recession should end last November 2008, and the longest would probably ended on April 2009.

Not exactly the case, in my opinion. Why?

Negative sentiment drive today’s recession more than before

I think that today’s recession might not be your typical recession. The emotional turmoil is as bad as the economic turmoil, in such a way that people left with unsecurity, uncertainty and negative thinking.

Even though the economy is supposedly rebounded on November 2008, the economic downturn inertia will lengthen the recession, even beyond what’s estimated as the long recession mentioned in the article above, April 2009.

As a non financial expert, but a self-made student of human behaviour, I view the recession will go well over April 2009, and will reach the peak on mid or late 2010.

I’m not sure, but neither the expert.

The best survival tool: financial education

Regarding how the recession will end, my answer would be this:

As everything in life – such as the ripple in a lake decreases when the wind speed decreases – after the panic, buzz and negative sentiment sustain themselves in people, the recession will gradually peaked and the economy will rebound – all with viral effects, as sentiment is contagious; The positive outlook of the economy will gradually, in itself, improve economy situation.

The question: How to accelerate economy sustainability?

The answer: As people start to gather themselves and start to learn from the situation, their financial intelligence increases gradually, and the new understanding will accelerate economy recovery – eventually.

The availability of money guides and money information, especially online, will help people to learn better, faster.

Nowadays, the phrase “Time is money” has never been this true before – the faster people learn, the sooner recession will end – the knowledge will set you free.

Image by emdot.