Saad Ullah
⬤ The Nikkei 225 recently broke its all-time high on February 22, 2024 — more than three decades after hitting its peak in the late 1980s. That's a sobering reminder of just how long stock market recoveries can take. Think about it: imagine the S&P 500 dropping 82% and taking 36 years just to break even. That's not some theoretical scenario — something similar happened after the 1929 crash, when it took roughly 25 years for the S&P to climb back to its previous highs.
⬤ These historical patterns matter more today as governments consider tax changes that could reshape how people invest. Higher capital gains taxes, new dividend rules, and stricter regulations on institutional investors might reduce incentives to put money in the market. In worst-case scenarios, sudden tax shifts could dry up liquidity and hurt smaller companies that depend on steady capital flows — even pushing some toward bankruptcy.
⬤ The key takeaway from both the S&P's historic crashes and the Nikkei's long recovery is simple: markets don't move in straight lines. Big bubbles can take decades to deflate. Recoveries depend on reforms, demographics, and overall economic stability. The Nikkei chart makes this crystal clear — after peaking above 38,000 in the late 1980s, it spent over 30 years underwater before finally setting a new record.
⬤ These long cycles are worth remembering. Markets move in extended patterns shaped by policy decisions, economic conditions, and how people feel about risk. Understanding these bigger arcs becomes especially important when structural changes or potential tax shifts could affect stock valuations for years down the line.
Saad Ullah
