It is much easier to destroy than to create. It takes seconds to blow up a building and years to erect it. Similar behaviour is observed in financial markets. They take years to reach their highs, but when uncertainty rises and panic and fear consume the markets, they tend to crash with the speed of light. Hence the saying “the bulls need to walk up the stairs but the bears jump out the window”. It is important to keep this in mind as this knowledge may help an investor better estimate the duration of his trades.
S&P Futures 2002-2012
The chart above portrays the S&P 500 futures between 2002 and 2012. Notice how it took 5 years to reach the highs of the bull market in the middle of 2007 and only 18 months for the market to completely collapse and reach even lower levels from the levels it started in 2003.
No comments:
Post a Comment