During a hot and sunny weekend recently, many people found it hard to find some shade. Warren Buffett famously said, “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
That tree doesn’t look great during the depths of winter. It’s leafless and looks withered. That’s a bit like how many people felt about the stock market and investing following the sell-off in 2022; some investors still feel that way today. However, as we all know, the tree grows taller each year and bears more fruit. This is like investments; they grow over time, despite the inevitable barren winter. The trick is not to cut down the tree before it comes into bloom or has a chance to grow.
This week’s chart shows that since 1972, bull markets in global equities (as represented by the MSCI World index) have lasted longer and produced higher returns than bear markets. The average bear market has returned -27% and lasted about 12 months, while the average bull market has returned 97% and lasted about 2.9 years.
The most recent bear market, which started on 8th December 2021, led to a decline of 15.7%. The current bull market, which began on 16th June 2022, has returned 45.1% thus far and if its in line with the historic averages weve highlighted, then we believe it still has a long way to run.
So to sum up – If you want to be free to spend more time enjoying the sunshine (or sitting in the shade) then give your investments time to grow.
Logic Wealth Planning provides independent financial advice in Manchester, Bury, Rochdale, Cheshire, and the surrounding area, but not limited to the region.