10 Years Later: What Have We Learned?

10 years from the depths of the great financial crisis

This Saturday, March 9, 2019, marks exactly one decade from very the bottom of the Great Financial Crisis (GFC) as measured by closing market prices of the S&P 500 index. On March 9, 2009 the S&P 500 closed at 676.59, it’s lowest point since 1996. A decade later and the S&P 500 is currently about 2,750: over four times its March 9, 2009 value. If at the bottom an investor had an invested balance of $250,000 in an S&P 500 proxy (think: index fund), and held through today’s date, the $250,000 S&P allocation could now be over $1 Million before taxes and fees. Easy right? In theory, perhaps it is. In reality experiencing the market recovery can be anything but easy, as the GFC and the subsequent ten years have taught us. Reflecting back, there are lessons we’ve long known, but can continue to learn from.


Rewind ten years. If you, your family or someone you knew was invested at the time, how did it feel? If fortunate to even have $250,000 for an S&P 500 allocation how confident would you be placing it into a market that nearly collapsed? Odds are, not very confident. For the period when the S&P 500 officially entered bear market territory in mid-2008 to March 9, 2009, an investment in an S&P 500 proxy could have lost over 47% of it’s value over roughly eight months. Extend this period back to the S&P 500’s peak in October of 2007 and the decline was 57%. Americans were questioning the very validity of our economy, forget about having confidence in capital markets & Wall Street. How easy does quadrupling your S&P 500 allocation over the last decade sound now? Given how loss averse investors are, an honest assessment could suggest you may have stayed on the sideline for some of the recovery, not capturing portions of the march back to stability.

Even following the impressive rebound for the rest of 2009 after March 9th for U.S. equity markets, the decade of 2000-2009 is often referred to by some, as the “lost decade”, as the annualized return of the S&P 500 index was approximately -0.9%. For each $1 invested in the index at the start of 2000, you would have $0.91 by the end of 2009, before taxes or fees. However, for many individual investors, the lost decade wasn’t just 2000-2009, but the decade that followed. Not because of poor investment performance as the previous decade, but because of poor investor behavior. Due to the pain of 2000-2009, some investors haven’t fully recommitted to investing or have perhaps engaged in market-timing strategies as they keep anticipating when the next downturn will hit. We think back and in hindsight see how easy it was to have had investments grow the last ten years, yet in reality we are faced with recognizing how difficult it can be to maintain our discipline on our own or know the right course of action to take in the present.

One of our many roles at Hudson Oak Wealth is to help our clients weather the storm based on their specific needs, learn from the past, and maintain true - yet sensible - discipline. We look to differentiate between the “noise” and “information” for our clients. While we can never guarantee what the future holds, we teach perspective and a scientific approach to the long-term power of markets to help our clients make more informed decisions and gain control over the emotional side of investing.

From 1926 through 2017, the same index that fell precipitously in 2008 & 2009, and experienced many other downturns before that, still produced an annualized return of 10.2%. Rolling 10-year periods of the S&P 500 for the same 1926 through 2017 time period have been positive more than 90% of the time. Further, of the 93 years from 1926 through 2018, the S&P 500 experienced a positive annual return over 73% of the time. When we experience a short-term shock to the system, a natural reaction is to lose-sight of the long-term - it’s in our evolutionary makeup as human beings. The evidence suggests however that having a more informed perspective may bridge the behavior gap between instinct and a more thoughtful approach.

Despite the encouraging data of the power of long-term capital equity markets, we don’t live our lives in decades, but in the day-to-day. It is easy to preach patience and point to data but what is one to do when the bottom falls out of the market? There is no magic answer that will always protect you in all market environments, and if someone says there is, they are likely selling something. The best approach for most investors is to remain diversified, appropriate with your specific risk tolerance and investment horizon.

While the S&P 500 is a strong proxy for a large part of many U.S. individual investors’ diversified portfolios, it is not necessarily the only component. U.S. equity markets are just one piece of a number of global investment opportunities. Being diversified can mean many different things to many different investors. To Hudson Oak diversification is specific to each investor, however we embrace diversity in client portfolios across asset-class, size, style, premiums, geographic location, tax location and other factors. A well-diversified portfolio for most is not going to perform exactly like the S&P 500 - intentionally by design. A diversified portfolio should be mutli-dimensional. To compare it directly to the S&P will often not make much sense. The intention is to reduce and minimize the level of volatility endured along the way to a successful outcome, while being better suited to withstand a 2008-2009 if or when that occurs.

What have we learned?

  • YOU ARE NOT IN CONTROL, BUT YOU ARE IN CONTROL. You have no ability to accurately control or predict what markets will do today, tomorrow, this year or this decade. If you can truly accept this, you may be able to better control your investment choices and behavior. If you are capable of this either alone or with a professional advisor, in the long-run you are likely going to be very much in control of your overall investment outcome. Historical evidence suggests that the longer the time horizon, the more reason to expect positive returns for well diversified investors.

  • AVOID MARKET TIMING. Who knew when the bottom really was in 2009? Who saw the GFC coming with such speed and severity? Who knows when the final top of the recent ten-year surge will arrive for good? Who knows if it will continue for another quarter, a year, or longer? It’s easy to make claims in hindsight about who knew what before it actually happened.

    Therefore, maintaining discipline to your investment plan is important. If you don’t have a plan however, there isn’t much discipline to maintain and it can become easy to veer off-course. It is our opinion that while markets can get nervy, building wealth through investing should be “boring” and no two people will have the same path to a successful result. Let markets do much of the work for you over time, consistent with a real plan in place.

  • DIVERSIFY. The use of a globally diversified portfolio appropriate to your risk and return requirements can help position investors to seek positive returns wherever they may exist. This means investing across asset-classes, sizes, premiums, styles, geographies and more. While even those that were well diversified during the GFC felt pain, they were more likely to have had a positive overall outcome and reduced volatility along the way more than those that were invested in riskier assets or U.S. stocks only. As a result, a diversified investor was more likely to stay the course.

  • INVESTOR BEHAVIOR IS CRUCIAL. Investor behavior can be equally or more important than investment performance to an investor’s overall outcome. For some, the past decade has shown that very clearly. You must be present in the market to participate in both it’s ups and downs. Do not allow recency bias - whether positive or negative - to sway you from your plan without compelling reasons or professional advice.

  • DON’T BELIEVE EVERYTHING YOU READ. Daily market commentary can cause anxiety. Many publications have a natural incentive to promote unnecessary financial activity because it garners attention and consumption. What better way to get attention than to either breed uncertainty or build-up a mania in the next-big-thing? There is rarely a quick fix and no one knows the future for certain. While of course not all sources are poor information, buyers should beware and do their homework before relying on all market opinions.

  • WORKING WITH AN ADVISOR MAY HELP. A qualified advisor you trust can serve as the resource to separate your investor emotions from your investment portfolio. An advisor may serve as a professional opinion during good times and bad, as well as act as someone to hold you accountable to a thoughtful, personal plan designed for your risk tolerance and needs.


From March 9, 2009 to where U.S. Equity markets are today we see much has changed, but also much has remained the same. There is almost no way the next ten years will be like the last decade, just as the last ten years were nothing like the ten that proceeded them. This is true in markets just as it is in our personal lives, and will likely be constant throughout our lifetimes. Similarly, while there will always be new investment challenges thrown our way, by sticking to time-tested principles we can increase our odds of having a positive investment experience. Though we can make educated investment decisions that over time are likely to yield positive results, there is no quick fix or easy answer. A well-designed plan and strategy to give you the investment result you need, consistent with your resources and risk capacity is a thoughtful place to start looking beyond the day-to-day and towards the longer-term approach to building or preserving wealth.

If you are interested in learning more on our perspectives and how we work with client portfolios, please contact us. We would be happy to see how our firm may be a fit for your needs.

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