Editorial: What’s behind the numbers?
Is the financial industry puffing returns from the stock market?
A recent magazine mailed out by a major financial firm included an article titled "The recovery around the world" which stated the stock market rebound that began in March 2009 boosted global financial markets. It showed the drop in the S&P 500 from Sept. 15, 2008 to March 9, 2009 to be -43.28 percent, while the increase from March 9, 2009 to Dec. 31, 2009 amounted to +64.38 percent. Sounds like stocks more than broke even, doesn’t it?
When one looks at the facts, the percentages are right, but stocks never broke even over the period. One S&P 500 index went from $110.38 on Sept. 15, 2008 to $62.66 on March 9, 2009 for a return of -43 percent, and then recovered by 64 percent by Dec. 31, 2009. The price on Dec. 31, 2009 was $102.67, nearly even with but still below the price on Sept. 15, 2008.
This is great news for someone who got in at the low point of the market, but those who held on through the worst are still waiting to get ahead. Since that optimistic report came out, the market has bombed again and started another climb back from the cellar. The 64 percent increase sounds attractive only because the starting base was so low on March 9, 2008. Beware when the financial industry uses enticing percentages in this manner. The economy is steadier now than it was in the depths of 2008, but clouds remain in the sky and the Main Street recovery is yet to take hold.