We are currently living through some interesting and unprecedented times and it can be difficult to gain perspective when we are in the middle of a crisis.
We have curated some articles and resources below that should allow for a more rational view of current events and this content will hopefully provide some reassurance for those of us who are struggling with the daily news feed at the moment.
This document shows the performance of the S&P 500 since 1926 and, most importantly, the relative length of ‘bull’ (positive) and ‘bear’ (negative) markets. The good news is that bull markets tend to last much longer and generate much greater returns when compared to the relatively short-lived bear markets. To support this, you can also download our very own ‘How The Market Works’ document here.
The theme here is the same as above. The key thing to note here is the shaded areas, which show the times of crisis or recession. Note how the stock market recovery often starts while the crisis is in full swing. For example, the 2nd World War lasted from 1939 to 1945, but the stock market recovery began in the middle of 1940 – almost 5 years before the end of the war. This same pattern can also be observed during the financial crisis in 2008/09.
We have shared this document many times before, but the message holds true. If you miss the best few days in the market, even over a long period, you significantly damage your total returns. If we look back 15 years from now, it’s not hard to imagine many of the best days being in 2020 given the volatility of the market.
In fact, yesterday (24th March 2020) is now on record as the 2nd best day in the history of the FTSE 100. This just goes to show that the best days often come on the back of the worst.
We have summarised some of the best new (and old) articles about investing in times of crisis.
If you are looking for something more substantial to fill a day at home, we would strongly recommend the following book:
Factfulness – By Hans Rosling
We have suggested this before, but this has to be our number one recommendation for those wanting to gain perspective on seemingly extreme events and the way that the media report on them. An essential read for every human being on the planet.
This communication is for general information only and is not intended to be individual advice. It represents our understanding of Law and HM Revenue & Customs’ practice. You are recommended to seek competent professional advice before taking any action.
Please note that investments can fall as well as rise and any income generated by an investment can fluctuate over time.