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Downturns and Recoveries

Downturns and Recoveries.

shelley
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Downturns and Recoveries

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  1. Downturns and Recoveries Securities offered through Lincoln Financial Advisors Corp., a broker/dealer,1300 S. Clinton Street, Fort Wayne, IN 46802-3506, Phone 800-454-6265.Insurance offered through Lincoln affiliates and other fine companies.Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. CRN200510-1003362

  2. Stock market contractions and expansions 1972–2004 $100 Contraction Expansion Stocks $10 $1 $0 Cumulative return 354.8 400% 281.5 200% 85.9 86.5 71.2 62.6 54.7 0% -42.6 -14.1 -16.9 -29.5 -14.7 -15.4 -44.7 -100% 2004 1972 1976 1980 1984 1988 1996 2000 1992

  3. Market downturns and recoveries 1926–2004 Downturn Recovery 34 months 6 months 7 months 5 months 6 months 8 months 19 months 21 months 14 months 20 months 3 months 5 months 2 months 25 months -83.4% -21.8% -10.2% -15.0% -22.3% -15.6% -29.3% -42.6% -14.1% -16.9% -29.5% -14.7% -15.4% -44.7% 151 months 35 months 5 months 7 months 10 months 6 months 9 months 21 months 5 months 3 months 18 months 4 months 3 months Sept 1929 – June 1932 July 1932 – Jan 1945 June 1946 – Nov 1946 Dec 1946 – Oct 1949 Aug 1956 – Feb 1957 March 1957 – July 1957 Aug 1957 – Dec 1957 Jan 1958 – July 1958 Jan 1962 – June 1962 July 1962 – April 1963 Feb 1966 – Sept 1966 Oct 1966 – March 1967 July 1970 – March 1971 Dec 1968 – June 1970 Jan 1973 – Sept 1974 Oct 1974 – June 1976 Jan 1977 – Feb 1978 March 1978 – July 1978 Dec 1980 – July 1982 Aug 1982 – Oct 1982 Sept 1987 – Nov 1987 Dec 1987 – May 1989 June 1990 – Oct 1990 Nov 1990 – Feb 1991 July 1998 – Aug 1998 Sept 1998 – Nov 1998 Sept 2000 – Sept 2002

  4. Periods of consecutive negative stock returns 1926–2004 60% 54% 37% 40% 29% 20% 20% Return 0% -0.4% -8% -8% -9% -10% -12% -12% -15% -20% -22% -25% -26% -40% -43% -60% 2000 2001 2002 2003 1929 1930 1931 1932 1933 1939 1940 1941 1942 1973 1974 1975 Average stock market return is 10.4%.

  5. Stock performance during recessions 1945–2004 2001 $1,000 Shaded regions denote economic recessions 1990 $100 1982 1980 1974 1970 1960 $10 1958 1954 1949 $1 $.10 1945 1955 1965 1975 1985 1995 2004 Hypothetical value of $1 invested at year-end 1945. Assumes reinvestment of income and no transaction costs or taxes.

  6. Stock performance after recessions 1945–2004 80% 74.0% Small company stocks 70% Large company stocks 60% 47.7% 50% 40% 33.7% 30% 20.1% 19.1% 20% 11.4% 10% 3.8% 2.2% 0% After 1 month After 6 months After 1 year After 3 years Cumulative returns of large and small stocks after recessions 1945–2004

  7. Average Current 6.85% 6.43% 5.86% 5.78% History of interest rates July 1954–December 2004 20% 15% 10% 5% 0% 1 yr yld IT gvt yld LT gvt yld Fed funds Each bar shows the range of yield for each bond over the time period July 1954 to December 2004.

  8. Bond yields during recessions 1946–2004 January 1946 through December 2004 18% 16% Shaded regions denote economic recessions U.S. long-term gov’t bonds 14% U.S. short-term gov’t bonds (4/53–12/04) 12% 10% 8% 6% 4.8% 4% 2.8% 2% 0% 1946 1956 1966 1976 1986 1996 2004

  9. ^ 12.0% Stock returns and monetary policy Annualized monthly returns, July 1971–December 2004 ^ Entire period average = 12.0% Monetary period Period length* Restrictive Expansive Jul 71–Oct 71 -1.9% 3 months Nov 71–Dec 72 24.4% 13 months Jan 73–Nov 74 -21.4% 22 months Dec 74–Jul 77 31 months 19.4% Aug 77–Apr 80 9.9% 32 months May 80–Aug 80 44.1% 3 months Sep 80–Oct 81 3.4% 13 months Nov 81–Mar 84 28 months 15.9% Apr 84–Oct 84 13.9% 6 months 33 months Nov 84–Aug 87 30.6% Sep 87–Nov 90 5.6% 38 months Dec 90–Apr 94 40 months 12.9% May 94–Dec 95 22.1% 19 months Jan 96–Jul 99 24.3% 42 months Aug 99–Dec 00 2.5% 16 months 41 months Jan 01–Jun 04 -2.2% Jul 04–Dec 04 25.1% 5 months -40% -30% -20% -10% 0% Average Return 20% 30% 40% 50% *Period length and calculation exclude the month of initial change in policy to measure “pure” monetary policy environment.

  10. U.S. market recovery after tragedy Cumulative return of the S&P 500 after tragic events 90% 81.4 After 1 month After 6 months 70% After 1 year 57.7 56.6 After 3 years 50% 26.9 30% 20.3 15.9 12.6 11.0 8.3 6.1 10% 2.2 1.9 1.6 -1.0 -4.9 -10% -20.5 -30% Dec 7, 1941 Pearl Harbor Aug 2, 1990 Iraq invades Kuwait Feb 26, 1993 World Trade Center bombed Sept 11, 2001 Terrorist attack Monthly data is assumed. Returns reflect the percentage change in the index level from the end of the month that the event occurred to 1 month, 6 months, 1 year, and 3 years after.

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