Potential Cost of Getting Out of the Market

History has demonstrated swift market recoveries can make sitting on cash a costly move. The chart below shows every decline in the Dow Jones Industrial Average (DJIA) greater than 20% since 1960:

Period Market Decline DJIA Change 1 Yr After Decline DJIA Change 2 Yrs After Decline
Dec. 1961 - June 1962 -27.1% 32.3% 55.1%
Feb. 1966 - May 1970 -36.6% 43.6% 53.9%
Jan. 1973 - Dec. 1974 -45.1% 42.2% 66.5%
Sep. 1976 - Feb. 1978 -26.9% 9.0% 15.1%
Aug. 1987 - Oct. 1987 -36.1% 22.9% 54.3%
July 1990 - Oct. 1990 -21.2% 26.2% 32.6%
Jan. 2000 - Mar. 2003 -35.8% 34.6% 43.2%
Average -32.7% 29.4% 45.8%
 
Oct. 2007 - Oct. 2008 -34.6% ? ?

Sources: Brandes Investment Partners, Dow Jones; FactSet; as of 10/09/2008