With much more positive equity market conditions over recent months, especially compared to early March 2009, many are starting to ask how long till we get back to the levels of early November 2007.

Vanguard have recently updated their Volatility Chart which provides some useful data proving insight into this question.  It charts the growth of $10,000 invested in the Australian share market at the beginning of July 1978.  Over that time it also reports on the extent and length of market declines and recoveries.

March 6th was the bottom of the most recent decline.  To get there the market fell 48.3% and it took 16 months to do so.  The average decline since mid 1978 has been 24.6% and lasted 8.6 months.  So this latest decline has been much deeper and longer than usual.  The average time to recover from a decline has been 15.3 months.

 

However, the longest time to recover has been 63 months after the crash of 1987 - a decline of 43.5%.  A decline similar in magnitude to the one we have experienced through 2008 and early 2009.

We are now 6 months into a recover which suggests there is some way to go before getting back to 2007 levels.  The years following 1987 suggest there is a long way to go.

Scott Keefer has been asked a similar question by Morningstar journalist Fiona Harris.  In his respons Scott has looked at historical returns data to estimate how long it might take for investors to make up the losses experienced in 2008 - See Investment Strategies for a Delayed Retirement.

Please clink on the following link to view Vanguard's Volatility Chart for yourself.