Looking at Numbers

In these troubled times there is a lot of data out on the net. I came across this when a co-worker brought it in with a Morningstar logo on it. The chart here, which is exactly the same as the one I saw with the Morningstar logo is from Lincoln Financial Group. The chart purports to give you an understanding of the relationship between downturns and the subsequent recoveries. Yet the first chart is arguably wrong. It is hard to think about any competent economist could believe that the Great Depression lasted only 34 months. Likewise, with an average rate of unemployment during the 1930s of about 17% (things were not counted in the same way then as now). The 1930s were not a continuous period of decline, either in the general economy or in the stock market. But it is odd to suggest that the decline described here was followed by a period of 151 months of continuous growth in the market or in the economy. There are many possible conclusions as to why the people who drafted this chart chose to portray the data in this way, but none of them are especially satisfying.

One thing is pretty clear from all those market declines since 1929 The recoveries from 1929 at 12 months, after they began have a median recovery of 44.3% (based on the total return for the S&P 500 index) - that is pretty spectacular! (That is from the National Bureau of Economic Research data and so it is pretty good.)