Morningstar - Q2 2020 - 41

EXHIBIT 2

Traversing Canadian Crashes Like the U.S. market, Canada's

A Flock of Canadian Turkeys Canada has experienced a black
turkey about once every seven years.

reward investors over the long term.
Growth of CAD 1 and Peak Values of the S&P/TSX Composite Index,
February 1956-March 2020

Cumulative Wealth
Logarithmic Scale

Largest Declines in the S&P/TSX Composite, February 1956-March 2020
Decline Decline
Rank
Peak

Peak Cumulative Value
$1,000

Market Crash Episode

$249.28
$193.81
100

1975
.

1995

2020

3 31 2 2 .

Canada has also had its share of market
declines. Nine of these declines were 2 or
more-on average, about one every seven
years. Including the current decline would bring
the number of crashes of 2 or more to
1 . The current crash would be the ninth worst.
The peak before the current decline was
in January; the drop since that peak was 2 .2
as of March 31. The worst decline was during
2 - 9. The
second worst was around the time of the dot-com
bubble crash. As measured by the Pain
Index, however, the dot-com bubble crash was
worse because although the declines
were almost the same, the period from peak to
recovery of the dot-com bubble crush was
much longer.
With Risks Come Rewards for the Patient
The presence of black turkeys in the historical stock
market return data is undeniable. What is
happening today due to the coronavirus is only
the most recent example. Nevertheless, the lesson
volatility. It is about the possibility of depressed
markets and extreme events. Fortunately, for
investors who can stay in the market over the long

February 2 11

Pain
Rank

Pain

43.3

May 2 8

February 2 9

2

43.2

August 2

September 2 2 July 2

1

3

39.1

June 1981

June 1982

April 1983

4

2 . 9

4

34.9

September 19 4 April 19 8

2

4 .13

9

12.18

19 3

3

39.8
1 .

2 .4

April 1998

August 1998

November 1999

2 .9

May 19

December 19

April 19 9

2 .44 July 198

November 198

July 1989

8

2 .38 May 19 9

June 19

January 19 2

21.22

9

2 . 8 December 1989

March 1993

18.48

1
1955

Recovery

1

10

0

Trough

199

1.9
8

1 .28

Source: Morningstar Direct.

run, the markets continue to provide rewards for
taking these risks. K
Paul D. Kaplan, Ph.D., CFA, is director of research with
Morningstar Canada. He is a member of the editorial board
of Morningstar
.
References
. .

. .

.2 .
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