During times like these, it can be helpful to remind ourselves of some of the past events that we have lived through and how the stock market crashed (and then duly recovered) during what at the time probably seemed like unprecedented crises.
It is often said that markets climb a wall of worry, referring to the fact that markets seem to constantly be worrying about something, however they still march on upwards over significant periods of time.
If you set aside the first 5 months of 2022 and take yourself back to 31st December 2021.
At that point, over the preceding 6 years, the FTSE 100 clocked up an impressive 49.53% total return (with dividends reinvested) while the S&P500 posted a truly staggering 174.81% total return.
These numbers really are quite impressive, so it is strange to think that during that time, the world also went through a whole shopping list of ‘unprecedented’ events. Just a few that spring to mind:
- 2016 – Brexit Vote
- Also, 2016 – Trump Elected
- 2018 – US / China Trade War Begins
- 2019 – Hong Kong Protests
- Also, 2019 – Covid-19 discovered
- 2020 – UK Leaves the EU
- Also, 2020 – Covid Lockdown
- 2021 – Suez Canal Blockage
- Also, 2021 – More Covid Lockdowns
Now, I think it is fair to say that many of these events were even more ‘unprecedented’ than the usual ‘unprecedented’ events. Any one of these events could have been ‘the big one’, ‘the one that is different’, ‘the event to end all events’, however, as it transpired, none of them were – for the markets at least.
Now the above period was clearly a fairly choppy 5 years, you might even say an ‘unprecedented’ 5 years, however, look back a little further.
If we go back to the 1900s and beyond, we have the first and second world wars. We have the Chernobyl disaster, 24% inflation and 17% interest rates of the 1970s and 80s.
With this context, current events do not look that unprecedented at all. The stock market has recovered from all of them and in some cases, has done so in record time.
As the old adage goes, it is not timing the market, but time in the market that produces returns.
And so, I now add two further events to my list of not-so-unprecedented-unprecedented events:
- 2022 – Russia Invades Ukraine
- Also 2022 – The cost-of-living spikes
I do hope that this helps provide some context and helps our clients avoid any sleepless nights. We have been here before and, unfortunately, we will probably be here again at some point in time, however, we always get through it.
Markets climb a wall of worry. The keyword there is climb!
Should you wish to speak to an Independent Financial Adviser, Contact Us for a free consultation with Alex.
Written by Alex Palmer DipPFS, IFA at Beesure Ltd