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Global equity markets have hit record highs throughout the autumn, extending this 10.5-year-old bull market.[i] In our interactions with investors, we find the older the bull market gets, the more common it becomes for investors to experience fear of heights. The 2007–2009 equity bear market was one of history’s deepest and longest, and we doubt anyone wants to experience a repeat. Indeed, sometimes it may feel like participating in even one brutal bear market can permanently set you back from your long-term financial goals. Yet the history of equity market returns shows this isn’t the case. Participating in bear markets can be excruciating—and mitigating some of the decline, if possible, can be beneficial, in our view. But historically, bull markets have always followed bear markets. Provided you are invested in the good times as well as the bad, we think enduring a bear market’s brunt needn’t be a permanent setback.

Because America’s S&P 500 has the longest reliable dataset, we think it is a helpful proving ground for this concept. Even though currency fluctuations would cause European investors’ returns on American shares to deviate from returns in US dollars, in our view, the lessons illustrated by this long history are universal.

Since reliable data begin in 1925, the S&P 500 has experienced 13 bear markets. This includes the two bear markets commonly lumped together as the Great Depression, along with the implosion of the Tech Bubble in 2000, 2008’s Global Financial Crisis and several others along the way. The average length of these bear markets was 21 months, with an average -40% peak-to-trough decline.[ii] This would be quite painful to experience. Yet during this span, we also had 13 full bull markets, excluding the present one. On average, they lasted 57 months, with an average 164% gain.[iii] On most occasions, the bull market’s return was great enough to erase the bear market that preceded it.

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In late October, financial pundits marked the 90th anniversary of Wall Street’s 1929 crash, widely viewed as the Great Depression’s starting point. Much of the coverage mentioned that US markets took 25 years to recover to pre-crash levels. That figure is based only on index price returns, which don’t include dividends—yet even including reinvested dividends, full recovery took more than 15 years. This long wait is the exception, however, not the norm. Looking at the wait alone doesn’t even tell the full story, in our view. A new bull market began in mid-1932, and US shares were more than halfway back to their prior peak by early 1937.[iv] But then the Federal Reserve drastically tightened monetary policy, which drained liquidity from the banking system and brought forth another recession and bear market, in our view. The Nazis’ annexation of Czech territory the following year, which we think forced markets to reckon with Hitler’s territorial ambitions and the rising likelihood of widespread warfare, further sunk markets. Shares didn’t resume rising until 1942. Overall, this was an astounding sequence of events investors today seem very unlikely to face.

The rest of history is more benign for investors. The average length of time from a market peak to the breakeven level—including the Great Depression—was just 5.6 years.[v] In a vacuum, this might feel like a long time. However, if you are investing for retirement, 5.6 years may be short compared to your investment time horizon, which is the entire length of time your assets must be working toward your goals and needs. Based on current European life expectancies, an investor nearing retirement today might need their assets working for them for the next 20 or more years—long enough, potentially, to see two or more bear and bull markets.[vi] As long as you participate in the bulls as well as the bears, with a long-enough investment time horizon, we think history strongly suggests you should be able to reap the long-term benefits of equity investing.

Of course, what is right for you will depend on your own circumstances—namely, your long-term investment goals, cash-flow needs, investment time horizon and risk tolerance. If your investment time horizon is short—meaning, if you need to use your money within the next few years—then the risk of a bear market may be too great to accept, and investing in something other than shares may be most wise. If you simply cannot stomach even the thought of enduring a bear market, then equities may not be optimal for you, as no firm can claim to be able to sidestep all of them perfectly. But for those with 20, 30 or more years ahead of them and a retirement to fund, take heart knowing that even if you participate in the next bear market, it shouldn’t automatically jeopardise your financial future.

[i] Source: FactSet, as of 13/11/2019. Statement based on MSCI World Index returns with net dividends.

[ii] Source: FactSet, as of 30/06/2017. Statement based on S&P 500 Index price returns in US dollars, 06/09/1929–09/03/2009. Currency fluctuations between the US dollar and Canadian dollar may result in higher or lower investment returns.

[iii] Ibid.

[iv] Source: FactSet, as of 30/06/2017. Statement based on S&P 500 Index price returns in US dollars, 01/06/1932–06/03/1937. Currency fluctuations between the US dollar and Canadian dollar may result in higher or lower investment returns.

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[v] Source: FactSet, as of 30/06/2017. Statement based on S&P 500 Index price returns in US dollars, 06/09/1929–31/12/2013. Currency fluctuations between the US dollar and Canadian dollar may result in higher or lower investment returns.

[vi] Source: Eurostat, as of 13/11/2019.

Fisher Asset Management, LLC does business under this name in Ontario and Newfoundland & Labrador. In all other provinces, Fisher Asset Management, LLC does business as Fisher Investments Canada and as Fisher Investments.

Investing in stock markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance is no guarantee of future returns. International currency fluctuations may result in a higher or lower investment return. This document constitutes the general views of Fisher Investments Canada and should not be regarded as personalized investment or tax advice or as a representation of its performance or that of its clients. No assurances are made that Fisher Investments Canada will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Not all past forecasts have been, nor future forecasts will be, as accurate as any contained herein


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