Time is on your side

  • 8th April 2020

If history alone is any indication, markets should eventually rebound. But there will continue to be uncertainties and volatility along the way.

When we have unprecedented global shocks to our financial markets, the short-term impacts can sound quite frightening. However, a true long-term investment perspective should look back as well as forward. By looking at historical events that have impacted the global markets, we can begin to build a picture of the potential timelines for market recovery.

From a historical perspective, investors considering leaving the equity1 market to “de-risk” or attempt to time the bottom may have missed out on potential market snapbacks when the bottom eventually was hit. Looking back, equity markets have averaged almost 30% in the first six months following the lowest point of a cycle.2

Timing any market is extremely difficult whilst trying to time the bottom of a bear market3 is nearly impossible. Dislocations are uncomfortable, but they have been historically temporary.

The table below shows subsequent recoveries during post-WW II bear markets of 30% or more.

If history alone is any indication, markets should eventually rebound. But there will continue to be uncertainties and volatility4 along the way.

The value of professional counsel during difficult market events cannot be underestimated, as planning for the future is almost always preferable over reacting to the past. With proper long-term planning and guidance from a financial professional, investors can help to be better prepared to navigate market volatility.

1 Equities: Shares issued by a company, representing an ownership interest.

2 Source: Bloomberg. Based on S&P 500 Index price returns, as of 23 March 2020.

3 Bear market: A market in which the prices of investments are falling, amid widespread pessimism and negative investor sentiment.

4 Volatility: the liability to change rapidly and unpredictably.

SOURCE: BNY Mellon Investment Management

The value of investments can fall. Investors may not get back to amount invested.

All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.