Five years ago, the world was bracing for a potential pandemic. But despite its severity, the stock market has shown remarkable resilience. A closer look at the lessons learned from the COVID-19 crisis reveals valuable insights for investors.
The key takeaway is that the stock market is not the economy. The S&P 500’s cumulative return of 112% over the last five years proves that markets can recover even in the face of economic downturns. This is because markets are forward-looking, reflecting investor expectations rather than current economic conditions.
Unexpected events often drive market movements. In March 2020, when everyone expected a deep recession, government stimulus packages and interest rate cuts sent shockwaves through the market. Instead of reacting to bad news, investors should focus on what’s expected next.
Market timing is a fool’s game. Trying to time the market based on economic news can be disastrous. The COVID-19 recovery was marked by a rapid 45% gain in just three months, demonstrating that the biggest gains often come when things feel most uncertain.
Feedback loops drive markets, both up and down. During the pandemic, hoarding toilet paper became a phenomenon due to social media and fear of shortages. Similarly, market movements are influenced by psychology and individual investor actions. Investing based on short-term movements can be perilous.
The stock market rewards resilience. Throughout history, from wars to economic downturns, markets have continued to rise over time. The COVID-19 crisis is no exception, with the S&P 500 delivering an impressive return.
In conclusion, investors would do well to remember that uncertainty isn’t something to be feared but rather navigated wisely. By acknowledging and embracing uncertainty, those who stay invested are more likely to come out ahead in the long run.
Source: https://www.forbes.com/sites/johnjennings/2025/02/28/the-biggest-investing-lessons-from-the-covid-crash-and-rebound