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History shows why it doesn’t pay to bet against US stocks

In a matter of days, the S&P 500 dropped 12% and into a bear market. One-day point drops in the Dow and S&P 500 set records, trading curbs were triggered and the history books recorded yet another March panic.

Market crashes have become something of a rite of spring in financial history. But looking back at some of the biggest panics in recent memory, one thing remains clear: It doesn’t pay to bet against US stocks.

It’s undeniable Americans have endured a year like no other. The US economy suffered its worst contraction on record and remains deep in a labor market crisis, but Wall Street has staged a stunning recovery. The Dow Jones Industrial Average is up 38% over the past 12 months, buoyed by a steady flow of support from the Federal Reserve, a fiscal firehose from Congress and unprecedented progress on vaccines.

Rewind a dozen years to another March panic that topped the headlines: This week in 2009 marked the bottom of the crash that triggered the Great Recession.

The reasons were very different: Financial engineering of subprime mortgages tanked the entire real estate market. Investment banks were brought to their knees and the global economy teetered. Governments and central banks around the world raced to control the fallout. But again green shoots sprouted. Since that March 2009 panic, the S&P 500 is up 482% (as of Thursday’s close.)

The dot-com bubble

Rewind even further to the dot-com bubble at the turn of the last century. In the late 1990s, a speculative frenzy gripped the stock prices of internet-related companies with no track records, no earnings, and barely a business plan.

By March 2000 the Nasdaq market index had soared 400% in five short years and hit a peak at 5,048. That was the end. The tech bubble burst and Nasdaq unraveled for years, hitting a low of just 1,114 in 2002.

Today, the Nasdaq is above 13,000.

In hindsight, of course, the mania seems ridiculous.

There’s an old saying on Wall Street: “They don’t ring a bell at the lows.” But if history is any guide, the Ides of March may not be such a bad omen after all.

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