Saturday, December 13, 2008

rebounds follow drops (usually)

Through the end of November, we experienced a very rare event, with the S&P 500 down 30% during three straight months of declines. Looking at the history of the market since its inception, there were only five prior cases where returns were this weak—four during the Great Depression. As you can see in "Market physics: rebounds have typically followed sharp drops" below, the market was higher during subsequent periods the vast majority of the time.

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