It highlights the Bull markets (increases in the market of 20% or more) against the Bear markets (falls in the market of 20% or more).
What does it show us?
It shows us that large increases or decreases in the market are not unusual. This is actually part of what the capital market is designed to do- to reward investors for taking risk. That’s not to say that it doesn’t hurt whilst we’re in it (like now) or that we don’t get very worried whilst it’s happening. But it does show the market bouncing back after a very steep fall.
The worst fall to date is a fall of 67% during the recession of the early 1970s. This lasted for 2 years 7 months and was no doubt a huge concern for those invested at the time. But at the end of the 1970s this was followed by the longest bear market to date which rose 3514% and lasted almost 13 years.
Is this market drop any different?
There has never been a drop before for the same reasons that we have now, covering both financial and health issues. But it’s probably fair to say that each big drop has been for a different reason which felt very unique and different at the time: depression, war, recession, inflation, Dotcom bubble, September 11th attack. Global financial crisis etc.
I have no way of knowing exactly what the market will do in the future, and I cannot deliver certainty. But from relying on the weighty evidence of history I can say that rationally I have no reason to believe this time is different. Over the last 95 years the market has reacted in a certain way, and I’ve no reason to believe it will react differently going forward.
How long will this bear market last?
I have no idea, but neither does anyone else. The longer it lasts the bigger the problem it will be for those currently drawing on their investments. Since 1925 the average Bull market has lasted 7 years with an increase of 507% and the average bear market 1 year 8 months with a loss of 36.50%.
What can we do?
I am monitoring what is happening and keep in touch with my clients regularly. I am continuing to have our scheduled meetings, but over phone or zoom rather than face to face. To me, as an adviser it’s really important to be there for my clients when they need me. I need to listen to their concerns and fears and ensure I’m available to help put their mind at rest.
If you wish to discuss what’s happening in the market now and what this means for you please email me at [email protected]. I can’t do anything to influence the market, but I can hopefully put your mind at rest if you are very concerned.