Since the beginning of the year, the stock market has been very volatile because of these 5 elements:
Pandemic, Inflation, Rate hikes (inflation and interest), War in Ukraine and COVID Zero in China which has just been added to the list and is blocking the port of Shanghai.
But what nags at the back of our minds the most is: what if we have a third world war (although the best geopolitical analysts agree that it is very very unlikely). We feel like all our investments would fall to zero.
A little history! The U.S. stock market, the one that concerns us most, did not close during World War II. In fact, it closed for 4 days, but that was to celebrate the Allied victory at the end of the war.
But what did the stock market do during this period?
(Dow Jones)
1939 : -2,92%
1940 : -12,72%
1941: -15,38%
1942 : +7,61%
1943 : +13,81%
1944 : +12,09%
1945 : +26,65%
And the cumulative total for the next 10 years is +395%!
Hopefully this can give you some reassurance despite everything that is happening.
Two other reassuring points:
The unemployment rate is very low and that bonds have already anticipated the rate hikes so they should stop going down.
Advice:
Avoid taking a 1 month view always look at 5 years.
Avoid regularly consulting your statements when things are not going well. It is the equivalent of looking at a wound and thinking that the more you look at it the more it will heal. The planet has been through a shock in the last two years and is in the process of organizing itself to get through it.
And yes, it STILL takes patience!
Let's just analyze this graph
The graph represents the American stock market.
We have an annualized total, that is to say the equivalent of 9.24% per year of return over a period of 90 years. Still interesting.
But the returns have never been between 8% and 10% to give an average of 9.24%. On the contrary, we have had periods of fat cows, very fat cows, lean cows and very lean cows.
One can't go without the other if you want yields of this magnitude. In statistics, we call this phenomenon dispersion. In investment, it is called volatility. Don't try to avoid the lean times, you risk missing the good times.
Don't forget that you are invested for the long term!
I'm always at the end of the phone if you want to discuss it.