I’m on holiday at the moment, loving the French countryside and beautiful weather and of course the vin: Vin Blanc; vin rose and vin rouge of the Languedoc. However, I felt compelled to write to all of you about the market turmoil and offer this sanguine advice…
Like you, I am very aware that the stock market is jumping all over the place at the moment. Indeed in the last few days, the US stock market has fallen by 20% since its high, at the end of 2021. This means it has entered a BEAR market. It also means the press, the BBC and financial commentators will be preaching doom and gloom and many investors will panic and presumably sell to cash. All that this does is crystallise the loss and make it very real!
This is exactly what we tell you not to do…and our advice is no different now.
Your investment will, over time, recover and grow. The key is keeping a robust cash pot to see you through until better times return which will happen, we just don’t know exactly when.
What is a Bear market I hear you ask; A bear market is when a market experiences prolonged price declines. It typically describes a condition in which prices fall 20% or more. For those of you who are interested, using the MSCI AC World Index – see the chart below – as a proxy for global stock markets, since 1980 global stock market investors had already experienced five bear markets by the end of 2021. During this period there were 16 corrections (declines of 10% or more), however, that didn’t stop global markets from reaching new highs over this period, even taking into account these falls.
And what of this bear market? It feels horrible. It is, but do not panic. We typically experience a bear market every 2-4 years with the last one being when the Covid crash of March 2020 happened. Before that it was was 2018. Remember that one? Nope? Me neither. We forget. We think each market correction is terrible; we forget it recovers. It’s a sad reality of the popular press that we only ever hear of bad news and rarely, if ever do we hear of markets gaining 10%+ in a day which can and does happen; it’s just we never hear of these gains. We only ever hear of the bad news as that is what sells column inches.
Anyway. I’m on holiday and I’ve just read a tweet which prompted me to write this episode of Don’t Forget the Fish:
‘If you feel as though you’ve been hit by a bus & reversed over too, then join the club. That said, #equities will ultimately recover once this awful #bear market has fully played out. They always do. It just takes time & lots of investor resilience’.
If you follow our 3-pot investment strategy and have cash – enough for two to three years of spending – just sit tight and remember your investment managers will, on your behalf, be buying up the best companies of the world at a 20% discount, ready for the eventual stock market recovery.
With that, I am reaching out as I write for another glass of Corbieres.