Do you remember Zebedee from the Magic Roundabout?
He bounced around on a coiled spring, and his catchphrase was: “Boing, time for bed”.
Like Zebedee, the market is making a quick bounce-back as shown here:
The average recovery time from a bear market is 648 days. The most recent comparable is the global banking crisis, and that took a year.
The current recovery is only 135 days in. We’re not quite back to January/February levels, but we’re getting there.
Rather than a U-shape, the graph looks like a big V. That said, we don’t know if it will turn into a W. No-one knows.
If you like digging into the detail, download this report by our friends at Betafolio. Q2 2020 Commentary
What this means to you
If you read our articles regularly, you’ll know that our work as financial planners is not just about numbers. It’s about investor behaviour.
Our clients pay us to help them sleep easy at night.
We do that by educating them into not panicking when the market drops.
We know that humans have an inbuilt fight-or-flight response. The bias is to flee from danger. And it feels dangerous if you see the value of your investments seem to vanish.
As a result, many people want to get out of the market when things are uncertain.
But, all you have to do is wait, and it will always improve over the long-term.
Just look at all the lovely green arrows on the latest quarterly review from Dimensional:
If you stayed in the market, we congratulate you on holding your nerve.
Like Zebedee, the market keeps bouncing up and down. The technical term is ‘volatility’.
P.S. For some easy bedtime reading you might like to revisit our previous articles on the subject: