Bottoming The Market
MARKETS BOTTOM AFTER CRISIS
There is a reason to pull the band-aid off quickly, after all. According to research out of JPMorgan (yes, that JPMorgan), markets bottom out after financial services firms fail. Over the last 25 years, JP said, there have been four failures of major financial services providers. (Name all four.) Each came - not surprisingly - amidst some major market distress. Each proved to be a bottom, and generally, pretty quickly. In the best case, the market marked its nadir in two days, in the worst-case, the market bottomed after two weeks. Six months after the collapse, the market had gained 10%; after 12 months, the rise amounted to 17%, on average. The lesson: investors should focus on long-term fundamentals, and not panic when one firm hit a rough patch. (And they were, by the way: Continental Illinois, Drexel, Kidder and Long Term Capital.) Of course, like all history lessons, this one works until it doesn’t.
"Financials could fall 50% from here"
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