What should you know?
We are in month 17 of the market downturn that began in November 2021.
Anxiety remains elevated amongst investors, many of whom are living through their first real experience of a prolonged temporary decline – the first one is always the hardest.
The chart below shows the ‘bull’ periods (growth cycles) and ‘bear’ periods (temporary declines) of the S&P 500 Index over the last 70 years:
-
-
- The average ‘bear’ market (temporary decline, shown in yellow in the chart above) has suffered an average cumulative loss of -31.3%.
- The average ‘bull’ market (growth phase, shown in blue in the chart above) has produced an average cumulative return of 155.7%.
- Temporary market declines, which are typically linked to recessions, are a normal part of economic cycles and occur frequently.
-
Why should you care?
You shouldn’t – this is normal and will pass. Be patient.
Keep following your financial plan and resist the temptation to make changes to your portfolio or to ‘wait for things to settle down’ before adding further funds into your investments. You should continue to invest during the downturn, this is a ‘sale’ on the best companies in the world and these ‘sales’ are a great opportunity for long term investors.
Market volatility is the price you pay for the excellent long term returns that equities will give you. This will not be the last temporary decline that you experience in your investment journey – stick to the plan and everything will be ok.
