As many expected, the media ran amock with the 'Liberation Day' announcements, and the resultant panicked actions of some investors led to the markets falling (as they do, a lot, temporarily!).

Last Friday it seemed that every post I saw on Linkedin was by an advisor saying something to the effect of 'Don't worry your little head about the markets - we'll be fine'.

As advisors, our intent in saying such things is generally always positive, however we don't generally always get that across effectively!

Most investors are well-educated and know what is going on in the world, so rather than talk down, perhaps we should express more empathy and less condescension?? Maybe something to the effect of, 'This is bloody terrible' or 'I'm an advisor and I hate market declines'!?

So here goes my own version;

‍

'Markets fall, a lot, and I bloody hate it too, but it's always been temporary'

‍

Is that any better than 'don't worry your little head'? I hope so.

Why Did I Write This Piece?

‍

I write this piece on Monday 7th April. I write it to remind myself and anyone that'll listen that we have all been through these moments many time, where headlines scream negativity, and our own nerves are tested. I write this because I know how uncomfortable and frightening these moments can be.

And I write it because I believe that checking-in on the bigger picture can bring calm to the chaos.

I'll share a few brief reminders on;

• Intra-year market declines
• Real-life examples from the past 5 years alone; 2020 and 2022
• Why staying invested and following a well-considered plan really helps us all.

As a fellow investor, pension accumulator, and an advisor to really sound investor clients (via pensions/ ARF/ investments), I really don't enjoy when markets appear to be in free-fall. I get zero satisfaction from that (unless it presents a great opportunity for an investor client to 'get-in'). It's scary for investors who may be watching it and reading the media. I feel for any clients who get sucked into that - hence I always encourage them, in great times and bad, that it's never as good or as bad as we feel it is at the time. So, ignore it, either way.

‍

‍

Investing - Simple But Not Easy

If there’s one thing we know about investing, it’s that markets will fluctuate. It’s baked into the experience. And yet, each time it happens, the emotional turmoil feels real. It feels personal. And it feels dangerous. So, let’s talk about that.

Every year, without fail, the MSCI Index and the S&P 500 experience what’s known as intra-year declines. These are temporary drops within the calendar year that can range from non-existent, to moderate and to severe.

Below is the MSCI Europe.

The key takeaway here is that over the period 1980, to 2025, the MSCI European Index fell by an average of 15.2%, at some stage during every single year! Temporarily.

‍

Yet, despite of (or because of, in reality) that volatility, the MSCI has delivered annual gross annual returns of over 9% (Curvo data):

‍

Looking at North America's Top 500 companies, the S&P500 index. Same deal!

Since 1980, average annual intra-year declines of over 14%, yet annual average positive returns of over 10% each year since 1980.

‍

‍

‍

Recent Market (Temporary) Declines of +20%

‍

2020 Anyone!?

In Q1 2020, we saw a dramatic drop of over 30% in the S&P500 and European Indices (and in the value of our invested assets!) as the pandemic wreaked havoc on economies and lives. It was sharp, sudden, and it rattled everyone. It was truly scary from an investor persepctive, nevermind from a life perspective. Yet, by year-end, it had largely recovered.

See the above charts, MSCI Europe was -34% intra-year decline, and finished the year at -4%.

The S&P500 chart above shows S&P had a -35% intra-year decline, and finished the year at +16%! (quite the swing!)

‍

What never ceases to amaze me is how quickly we forget how scary that was as investors. Talk about Covid 19 madness or the markets' reaction to someone now, and they look at you as if you are talking about the 1960's - it's a distant memory, but the reality is that is in the very recent past!

2022?

Then 2022 came along, a year where markets experienced consistent downward pressure thanks to inflation fears, geopolitical concerns, and shifting economic policies.

For 2022, MSCI Europe was -21% intra-year decline, and finished the year at -11%.

The S&P500 chart above shows S&P had a -25% intra-year decline, and finished the year at -19%

The overarching point here is that only 3 years ago, we had not only a heavy intra-year decline, the markets finished the full calendar year in negative territory. Sine 1980, finishing the year in negative territory has happened in 1 in 4 years on average. Take it that it'll happen ever 4 years on average, the other 3 will see us achieve positive returns for the full year.

My Crystal Ball!? 

Looking back a bit further, in 2019 I shared some insights on annual declines of -13.9% on average (Blog 99).

This was just before the Covid pandemic hit. This was at a time when most of us couldn’t have imagined the global upheaval that was just around the corner. Despite those declines being average, the following year, 2020, tested the resolve of investors everywhere. Yet, those who stayed invested and stuck to their plans saw their portfolios recover as markets rebounded.

Fast forward to early 2025, and I recently discussed the hypothetical scenario of a 30% market decline this year (Blog January 2025). The point I made then is even more relevant now: it’s not about if markets will decline, but how we respond when they do.

Reacting out of fear can often lead to detrimental financial decisions that don't aid our future selves.

It’s important to acknowledge that seeing your life savings, your hard-earned savings and wealth, go through these turbulent periods like last Friday can feel deeply unsettling.

You turn on the news, and the media is shouting about market collapses, investor panic, and impending doom. It’s an emotional rollercoaster, and you’re strapped in whether you like it or not. Every bone in our body might be screaming at us to pull the ejector cord. But we don't pull the ejector cord when we hit turbulence on an airplane, for good reason!

But here’s the thing: while these intra-year declines feel awful when you’re in them, they are part of the journey. They have always been part of the journey. We have been here before. We know the deal. We'll be OK.

If we look at the past 40 years of market performance, the S&P 500 has had average intra-year declines of around 14%. Yet, most of those years ended positively. The market’s long-term trend has been upward, even though the road is bumpy.

Most of us have a plan with our invested assets. And when we have a well-considered plan, guided by evidence and prudence, we're already in a positive and privileged position. It’s a foundation we can lean on and assure ourselves with when markets decline, temporarily.

Sticking to your plan when headlines scream uncertainty isn’t easy, if it was, everyone would be able to do it - and they clearly can't (see market sell-off last week for details!). Whether the market declines 10%, 20%, or 30%+, the best response is often to stay the course and continue making prudent decisions based on your long-term objectives.

When you see the scary headlines and feel the urge to react, remember: this too shall pass. And more importantly, remember: we will be OK.

‍

And because I love a good chart - the below sums it up really well.

The returns of a relatively conservative 60/40 portfolio (60% S&P500 Equity and 40% US Treasury Bond portfolio), following economic and geopolitical shocks....

From the Gulf War, Covid, Lehman Brothers collapse, 9/11 - all shocks, all scary, all undesirable events and market declines. However, the average 1 year subsequent returns were c9%, and the average 3 year subsequent returns were c22% in this data set.

How far are we from the current 'shock' being over? Who knows.

Will we recover? Damn right we will.

‍

Conclusion

We’re all a bit scared, none of us enjoy days like last Friday (not Today), and that’s completely natural.

None of us enjoy seeing the value of our investments drop or hearing negative news about the markets. But by maintaining a steady, patient approach and not letting fear drive our decisions, we will be just fine. This is part of the journey, and our long-term plans are built to withstand it.

It also reminds me of a grizzly old broker years ago telling me that when he opens up a new insurance product investment for clients (and collects his 'big comish'!) he tells the customer that if the markets fall, and they want to throw a rock through his office window when, to make sure they attach a cheque to it, and he'll top up their account to buy the dip :)

Markets fall, I hate it too, but it's always been temporary.

I hope this helps.

‍

Paddy Delaney QFA RPA APA

In other news - a Global Bond Fund is up c4% in the past 12 months and c2% year to date.

For the past few years many have wondered why in the world they have bonds in their portfolios. Well, now they know. If we are properly allocated, we have more than enough bonds to get us through the next few years. We are not at the mercy of the markets. The odds are overwhelming, stocks will be at new highs before we need to access money from that part of our portfolios. Enjoy today day, ignore the markets, and embrace the chaos. This is the exact reason stocks provide better returns over the long run.

‍