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Bear with … and cut the bull

Are current events unprecedented, or does history have a habit of repeating itself?

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Ian Millward
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Unprecedented is surely one of the most overused words of recent years. Brexit and every painful ramification within it … unprecedented, covid… unprecedented… and more recently the calamity within government, inflation, and ongoing war in Ukraine … unprecedented.

There is a very serious point to this. As many times as we try and reassure people that falling values are an unpleasant, but perfectly normal, part of the investment journey, a small minority will doggedly cling to the fact that, in fact, this time it really is … unprecedented.

That is because that is always how it feels at the time, with perspective and rationale only returning after the event. I read somewhere that there have been 21 bear markets since 1928 – an average of one every 4½ years. Each one, no doubt, unprecedented.

The accepted definition of a bear market is a market fall of 20% but, to my mind, it is much more about mood and a collective fug where people doubt that the stock market will ever make money again. It says a lot about human nature, and our inability to manage our emotions, that we doggedly cling to this belief despite the irrefutable and compelling evidence to the contrary.

Even when accepting that markets will eventually recover, many question whether they have time on their side to wait for a recovery. But average life expectancy for a 65-year-old couple is 89 years of age (more than for either a man or woman because now we are talking about two lives). That is 24 years or, put another way, the likelihood of at least five more unprecedented crises!

But I don’t think our industry serves people well in a crisis either, with the advent of 24-hour news and experts and commentators seemingly selected to play to our worst fears instead of providing true insight and perspective.

In complete contrast, pin-striped advisers and wealth managers often talk in banal and abstract terms referring to things like corrections, quartiles, and correlations. My favourite was a recent podcast where a fund manager kept referring to negative total returns. How hard is it to say your fund has gone down?

So here is my ‘bull’-free, plain English prediction, delivered in the midst of an ‘unprecedented’ crisis.

It will get better. Markets will recover and even break new highs. Not just break them but smash them beyond all recognition. I cannot tell you the when, or how long you will need to wait, but it will happen.

I can tell you that bear markets tend to be a lot shorter lived than bull markets. And that bull markets often follow closely behind bear markets. And that missing the early days of a turning point runs the risk of making any attempted market-timing exercise worthless.

We understand that things feel rubbish right now, but feelings are not facts. In reality, what we are going through now is entirely with precedent and perfectly normal.

When we break script and start trying to make market calls, that is the time to worry. Despite the natural instinct to want to protect what you have or, at the very least, be reassured by a whirlwind of frenetic activity, the right thing to do is ensure your portfolio is sensibly diversified and wait.

Do nothing. Bear with … and wait for the bull.

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