Time To Recovery: The Only Metric that Matters!

Long term investors need to know how long is long?  All we know is history, so lets look at it!

Since 1900 the DJIA has had 12 major market breaks (or "bear" markets when over 20%). Every researcher judges breaks differently. The breaks here begin with the 1903 so-called "rich man's panic", the 1907 break "saved" by J. P. Morgan, WWI 1916 break, 1920 postwar break and 1929, of course. 

Then 1961s steel strike, the 1966 "Go Go" break, 1974 Nixon resignation, 1987 program trading, the 2001 "dot com/911" bust, the 2009 financial crisis and our very own 30% coronavirus break which we are in the middle of right now!

Sources: DJIA closing price data from Macrotrends downloaded years ago and Yahoo Finance. 

Market Breaks since 1900: 12
Average Size of Break: 58%
Average Duration of Break: 1.4 years
Average Time to Recovery (peak to peak): 5.6 years

Some Notable Breaks:

Worst Break:
9/3/1929: 381.17 to 7/8/1932: 41.22  down 89%
Duration of Break 2.8 years
Recovery Date: 11/23/1954: 382.74
Time To Recovery: 25.2 years

Best Break over 20% (definition of a bear market)
2/9/1966: 995.15 to 10/7/1966: 744.32 down 29%
Duration of Break: 7 months
Recovery Date: 11/13/1972: 997.07
Time to Recovery: 6.8 years

Dot Com Bust:
1/14/2000: 11723.00 to 9/21/2001: 8235.81 down 35%
Duration of Break: 1.7 years
Recovery Date: 10/3/2006 11727.34
Time to Recovery: 6.7 years

Financial Crisis:
10/9/2007: 14164.53 to 3/9/2009: 6547.05 down 77%
Duration of Break: 1.4 years
Recovery Date: 3/5/2013 14253.77
Time to Recovery: 5.4 years

The shortest time to recovery was 8 months during the 1996 7% market break.

Based on the average market break since 1900 above, what does it mean for today? Let's see. ESTIMATES IN RED.

Coronavirus Break:
2/12/2020: 29551.42 to 9/12/2021: 17139.82  down 40%
Duration of Break: 1.2 years
Recovery Date: 9/12/2025
Time to Recovery (peak to peak): 5.6 years

A case may be made that a pandemic may not last as long as a financial panic. If so, all to the good, otherwise based on 120 years of data, we may have a while before this market recovers.

3/31/20-this post was revised to show peak to peak Time to Recovery versus low to peak. We don't know if we made our lows but we DO know the high.

Feel free to post comments.

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors.