At Prato Capital Management we often discuss using history as a guide in conjunction with using all currently available information to maintain our investment strategy.
As much as we would like to see the stock markets always rise in value, sometimes that is not the case. As we work through the current declines, then gains, and much volatility, we should look at the history of the S&P 500 after previous downturns.
The chart below illustrates two main points. The first is that declines of 20% or more of the S&P 500 have happened in the past and if history proves us correct will happen again in the future. The second point is that over the past 90+ years patient investors have been rewarded after market downturns. The reason being is bull markets historically last longer than bear markets with returns that have been much higher than losses from market downturns.
At Prato Capital Management we strongly believe that a sound financial strategy uses information from the past and present to guide us for the long-term. History has shown that being invested in the stock markets over the long-term has been profitable even after factoring in market downturns as we have recently seen.
