Chart Focus Newsletter February 2010
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Companies deciding whether to move forward now with acquisitions or major capital projects should weigh the historical data on the timing of stock market recoveries. One common analysis calculates how many years must pass before the market returns to normal, assuming growth at the long-term average rate of 10 percent annually. In past recessions, however, the stock market came back from the trough much more quickly, with cumulative returns—over the two years that followed it—of 50 to 130 percent. If this pattern holds in the current downturn, companies waiting too long could miss the upside of the rebound.
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To learn more about how companies can decide whether the moment for investments has come, read “The crisis: Timing strategic moves” (April 2009).
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