As your trusted adviser we need to prepare you for unpleasant events to avoid them being an undue shock and so we should talk about the stock market.
The 18 months before last October were dull, the stock market went sideways, money was not made. Since then most investments have climbed steadily – a welcome relief and most accounts are at or near all time highs.
The markets are generally forward looking, meaning they spend most of their time anticipating rather than reacting. They are pretty good at this overall but, from time to time, they are caught out.
Currently they are saying “things look good to us, we expect better times - more growth, lower interest rates etc.". The mood is optimistic and positive.
Which is exactly why we should remind you that good times do not last.
In time things will turn sour; something will cause values to fall. We never know when or why or try to predict. As we don't know when or why (and we refuse to guess) the best we can do is be prepared.
We expect a 10% fall and full recovery EVERY year (we are due one) and a 30-40% drop and full recovery EVERY 3-5 years (one should be round the corner). The key points about downturns are:
1. They have always been temporary.
2. The recoveries have always been full.
3. The permanent long-term uptrend has always reasserted itself.
4. The cash and bonds have always allowed you to carry on living how we planned.
5. And they have given us the opportunity to make outsized gains from the temporary falls.
I am sure it will be no different the next time round, and there will always be a next time.
So, this is a reminder that the good times eventually falter, the falter has always been temporary, and you are protected from it the best we know how.
You know where we are if you need us.