Context
Everyone says that we are living in unprecedented times which indeed we are. The stock market has just experienced the most rapid fall ever due to the virus and the sheer speed has been extremely unsettling for all investors. As at the date of writing the fall has been approximately 30% which is not the largest fall ever but it is unique to its suddenness. The purpose of this update is to give you some perspective by showing all the significant falls for the last 100 years and how markets reacted in the aftermath.
100 Year Bull / Bear Analysis
| Market Cycle | Start Date | End Date | Change +/- | Duration |
| Bull | Jan-26 | Oct-29 | 47% | 3yrs 10mths |
| Bear | Nov-29 | Jul-32 | -45% | 2yrs 9mths |
| Bull | Aug-32 | Jan-37 | 142% | 4yrs 6mths |
| Bear | Feb-37 | Aug-40 | -42% | 3yrs 7mths |
| Bull | Sep-40 | Nov-51 | 341% | 11yrs 7mths |
| Bear | Dec-51 | Jul-52 | -22% | 8mths |
| Bull | Aug-52 | Aug-57 | 160% | 5yrs 1mth |
| Bear | Sep-57 | Mar-58 | -20% | 7mths |
| Bull | Apr-58 | May-61 | 168% | 3yrs 2mths |
| Bear | Jun-61 | Aug-62 | -21% | 1yr 3mths |
| Bull | Sep-62 | Feb-69 | 185% | 6yrs 6mths |
| Bear | Mar-69 | Jun-70 | -30% | 1yr 4mths |
| Bull | Jul-70 | May-72 | 103% | 1yr 11mths |
| Bear | Jun-72 | Dec-74 | -67% | 2yrs 7mths |
| Bull | Jan-75 | Oct-87 | 3514% | 12yrs 10mths |
| Bear | Nov-87 | Dec-87 | -34% | 2mths |
| Bull | Jan-88 | Sep-00 | 571% | 12yrs 9mths |
| Bear | Oct-00 | Feb-03 | -43% | 2yrs 5mths |
| Bull | Mar-03 | Nov-07 | 135% | 4yrs 9mths |
| Bear | Dec-07 | Mar-09 | -41% | 1 yr 4mths |
| Bull | Apr-09 | Dec-19 | 212% | 10yrs 9mths |
Comment
You will note that the falls tend to be much shorter in duration than the subsequent rise. With the benefit of hindsight it is also clear that if you had invested after a fall of 30% there would have been a relatively small additional fall in all but one case before enjoying substantial capital growth. These buying opportunities are relatively infrequent and those who have capital to invest for the longer term should consider this with measure. For all of us who have money invested at present, we can take reassurance from the fact that markets have always recovered relatively quickly, no matter how great the fall. Because of the pervasive wall of news coverage of the current situation and the speed of the stock market falls it is possible that the current market depression may be shorter than previous ones. At least that is what governments are trying to achieve by printing countless amounts of new money! However, you will continue to see companies struggling to stay afloat and many fail to make it to the recovery. This is the fact of recessions, but those companies that survive become stronger and provide more jobs for those displaced and markets forge ahead with the new leaders. The news media want to compete for your attention through sensationalism but often they fail to explain the bigger picture. They emphasise the visual and the dramatic for that reason.
And Finally…
Everyone has become a lay epidemiologist, flooded with educational content from many sources and some may now wish to stay away from talk of the Coronavirus. But for those who are interested, the following link is to a TED talk which is the most comprehensive explanation of the current viral epidemic that I have personally come across. If you have seen TED videos on YouTube you will be familiar with the quality of content and delivery they provide and this is no exception.
Sonia Shah says pandemics are not inevitable The TED Interview
Peter Yarr
Director