Idea Lab - Why The Financial Experts Are Guessing
In the Lab today, I took a look at the major financial crashes & events from history to pull together some lessons for us.
I started by sketching out a quick review of all the main events.
The Wall Street Crash (1929)
The market completely collapsed & declined for the next 3 years. It took around 25 years for the markets to recover.
Black Monday (1987)
The market fell by more than 20%, partly accelerated by the introduction of computerised trading. This one bounced back fast and within 2 years the worst was over.
The DotCom Crash (early 2000s)
A drop of 80% of market value happened between 2000 & 2002. Experts vary their opinions on this one but some estimate it took 15 years to recover the value lost.
2008 Financial Crash/Recession
I lived through this one and feel able to assess this from the inside. Best estimates put this one at 4 years to recover. In reality, I think it was much longer than that in most sectors but it’s impossible to measure all sectors.
Covid Crash (2020)
We all are too familiar with this one. The market dropped 11%, 10% and 10% over 3 weeks at the end of Feb/start of March. This time the market bounced back within 2 months!
Conclusion
Beware anyone predicting or making guarantees about what going to happen over the next 12/24 months.
The real truth is that they are guessing. No one knows.
The only two investments you should be making are in yourself and in your business. Anything else is speculation. And if you do speculate, ensure it’s diversified and not using the money you need in a hurry.
You can listen to the full episode here
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