COVID-19 Update No.3 — Lorica Partners

An important part of our role at Stewart Partners is to give our clients the confidence that it is sensible and prudent to remain disciplined when stockmarkets are volatile. This article hopefully adds to that confidence.

Stewart Partners is one of the founding members of the Global Association of Independent Advisors (GAIA). One of the primary benefits of this collaborative study group is each member’s willingness to share new ideas and resources for the benefit of each firm’s clients.

One of our members, Mancell Financial Group, has shared their recent work examining each fall of 20% or more in the US stockmarket since World War 2, and the subsequent recovery. With their permission, we are sharing their graphs with you.

Since 1939, there have been 16 market falls of 20% or more, including this 2020 edition. That equates to, on average, one 20% fall every 5 years. We would thus describe this current volatility as uncomfortable but normal. Whilst the catalyst for each market episode differed, there is no “new normal” about market volatility.

Whilst the timeline for recovery differs for each market fall, ranging from a few months to a few years, the one common feature is the stockmarket did recover in every instance. There is no reason to expect anything different in 2020.

Note all data is in USD based on the S&P 500 Index. Charts show movements on a monthly basis. Falls shown as a percentage are peak to trough falls.