RE:The only thing we have to fear is fear itselfWinston1 wrote: As the great Franklin D. Roosevelt said in his 1933 inaugural address at the depth of the Great Depression, "the only thing we have to fear is fear itself." During the Great Depression everyone thought life would never return back to normal, but it did. During the 1987 flash crash, the 2000 dot com meltdown, the 2008 financial crisis, and the March 2020 Covid crash everyone thought life would never return back to normal, but it did, more or less. Now in 2022 everyone fears sky high inflation, rising interest rates and a recession. Don't worry about it, this too shall pass and life will return back to normal. A deep recession will cure sky high inflation and sky high gas and food prices. The fed will likely keep raising rates until we get into a recession, but then they'll start cutting rates to get us out of a recession. Take the long view, it's not any different this time. The world is not ending and things will eventually get back to normal.
Not saying that what will take place in the future will be nearly as bad as the Great Depression or the 2007-2008 Financial Crisis, or that XBC is doomed if interest rates and inflation continue to rise, but, courtesy of Investopedia:
The Stock Market During the Great Depression: The crash began on Oct. 24, 1929, known as "Black Thursday," when the market opened 11% lower than the previous day's close. Institutions and financiers stepped in with bids above the market price to stem the panic, and the losses on that day were modest, with stocks bouncing back over the next two days.
However, the bounce was short-lived since the following Monday—now known as Black Monday—the market measured by the Dow Jones Industrial Average (DJIA) closed down 13%. The next day, Black Tuesday, the Dow, which contains some of the largest companies in the U.S., fell another 12%.
Before the crash, which wiped out both corporate and individual wealth, the stock market peaked on Sept. 3, 1929, with the Dow at 381.17.
The ultimate bottom was reached on July 8, 1932 (almost 3 years later) where the Dow stood at 41.22.
From peak to trough, the Dow experienced a staggering loss of 89.2%.
Although the price of many large, blue-chip stocks declined, smaller companies suffered, even more, forcing companies to declare bankruptcy. Many speculative stocks were delisted from stock exchanges.
It was not until Nov. 23, 1954, (25 years later) that the Dow reached its previous peak of 381.17.
The 2007-2009 Financial Crisis: The seeds of the financial crisis were planted during years of rock-bottom interest rates and loose lending standards that fueled a housing price bubble in the U.S. and elsewhere....
...The Federal Reserve lowered the federal funds rate from 6.5% in May 20004 to 1% in June 2003.5
The aim was to boost the economy by making money available to businesses and consumers at bargain rates.....
....Eventually, interest rates started to rise and homeownership reached a saturation point. The Fed started raising rates in June 2004, and two years later the Federal funds rate had reached 5.25%, where it remained until August 2007.
There were early signs of distress. By 2004, U.S. homeownership had peaked at 69.2%.8 Then, during early 2006, home prices started to fall.
This caused real hardship to many Americans. Their homes were worth less than they paid for them. They couldn't sell their houses without owing money to their lenders. If they had adjustable-rate mortgages, their costs were going up as their homes' values were going down. The most vulnerable subprime borrowers were stuck with mortgages they couldn't afford in the first place...
...By the winter of 2008, the U.S. economy was in a full-blown recession...
During this period, the stock market dropped 57% from October 2007 to March 2009 and took more than four years to recover.
So yes, the stock market eventually recovers, but it may take longer than you think.