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Taking Stock - So, what now?

Date: 21 June 2022

As of the beginning of last week, we’ve just entered our eleventh “bear market” (in dollar terms) for global stocks since 1970, defined as a 20% decline from peak levels.

The eleven bear markets in dollar terms

A weakening pound has helped insulate domestic investors from the worst of these drawdowns (just don’t be going on holiday to the States anytime soon), but the above gives us a decent barometer of global investor sentiment. In short, it is not great.

So - now that we have breached this historically important level, what now?  Well as you can see from the above, in most past bear markets the picture got worse in the short term as sell offs deepened – but if we look at one-, three- and five-year returns for global stock markets (MSCI World) post breaching the 20% drawdown level, the picture is pretty encouraging.

Bear Market

% 1-year return

% 3-year return

% 5-year return













































After entering official bear market territory, you have historically had a 60% chance of a positive return over twelve months, a 66% chance of a positive return over three years, and on every previous occasion global stocks have entered a bear market since 1970, they have posted positive returns over the following five-year period.

Yes, but...

Yes, but central banks are raising interest rates and tightening financial conditions.

Yes, but inflation is printing at multi-decade highs.

Yes, but a slowdown in growth, or even a recession, is now on the table.

Yes, but for the first time in a generation it feels like there is the potential for conflict between the world’s superpowers.

Take your pick – you would have had to have had your head in the sand for the last six months to not see what is wrong with the world. We are confronted with it every single day. I’m not looking to make light of these factors at all, but I would simply point out that during all of the aforementioned bear markets stocks were down for good reasons too, and every single time they recovered. Sometimes quickly, always eventually.

I have made a habit in my end of year communication to clients of including a list of all of the negative headlines that investors have had to deal with over the course of the prior twelve months. Here is 2020’s selection:

  • The impeachment of a sitting President for only the fourth time in history;
  • Severe escalations in tensions between the US and Iran;
  • Natural disasters including, but not limited to, historic bushfires in Australia;
  • The Prime Minister falling seriously ill;
  • Continued trade dispute between the US and China;
  • An acrimonious Presidential race, and a disputed election result;
  • Deadlock regarding the UK’s future relationship with Europe post Brexit;
  • Negative oil prices;
  • The worst economic data since the Great Depression; and
  • The Coronavirus.

Global stock market indices ended 2020 in the green. I think we can also safely say at this stage that our Prime Minister has made a full recovery.

We won’t need “good news” for the stock market to bottom. It will only happen (may have happened already) when investor pessimism about the future has peaked. Working out when this will occur is impossible, one of Donald Rumsfeld’s “known unknowns”. All we can do in the meantime is stick to the plan.

David Miller, my former colleague and author of the long standing and excellent “Diary of a Fund Manager” series wrote “optimism always outperforms pessimism”. Taking inspiration from David, you will be hearing from me on a regular basis moving forwards.  I’m hoping to offer you a touch point of historical context and relative (!) common sense, to counterbalance the negativity that we are all bombarded with as investors on a daily basis. Rich pickings at the moment! I’m new to this game though, and would like to get better, so any feedback is genuinely appreciated – you can register to receive the bi-weekly column here and please do send me any questions you may have.

Take care.

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