Forecasting short term market behaviour is currently as difficult as predicting the progression and outcomes of the COVID-19 pandemic, and the only certainty seems to be the uncertainty of what the markets will do next.
Fund managers are paying careful attention to medical expert’s predictions and looking at countries who are now beginning to recover from the impact of the COVID-19 virus, such as China.
However, it is possible to look back through history at previous market movement and use this to identify opportunity. In reviewing the previous interchanges from ‘Bull’ to ‘Bear’ markets, it is possible to see that those who invested at the right time then reaped strong returns when the market returned to a Bull phase.
A Bull Market is defined as ‘a time when the prices of most shares are rising’ (Cambridge English Dictionary, 2020), whereas a Bear Market is defined as ‘a time when the price of share is falling and a lot of people are selling them’ (Cambridge English Dictionary, 2020). Traders and fund managers define a Bull or Bear market as when the market changes direction by 20% or more.
By looking over the past 100 years of market behaviour, it is clear that volatile markets recover over time, and those investors that see them through or actively invest at the right moment, benefit in the long-term. Investing in markets is not for short-term gain, and plans should be made over 5-year, 10-year or even longer time periods.
Reviewing market behaviour (S&P500) since 1926 (First Trust LP), the average Bull Market period lasts 9.1 years with an average Bear Market period lasting just 1.4 years. Over a 20-year investment lifespan the average investor would be likely to experience both Bull and Bear Markets.
Rhodes Wealth Management and St. James’s Place Wealth Management encourage clients to look at their investments from a ‘time in’, not ‘timing’ perspective. Investments are made to achieve long-term goals, and through proactive management of funds by your fund managers, these market movements can be navigated, and potentially benefited from.
Although the context of this Bear market is different to historic events, the ending will likely be the same, with the end of the Bear market moving into another rewarding Bull market for investors.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select, and the value can therefore go down as well as up. You may get back less than you invested. Past performance is not indicative of future performance.
History of U.S. Bear and Bull Markets since 1926, First Trust LP, 2020
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