In our Investment Market Review, we discuss the fall in the markets in the fourth quarter of 2018 and whether the recent sell-off is justified or an over-reaction to fears of recession. Over January markets are in general up on the December close but no one knows what the next short term move in valuations will be. What we do know is that the market volatility that has been experienced in the past few months is not unusual from a historical point of view. We have seen market declines and subsequent recoveries regularly occur in the past. In fact, post WW2 data confirms that the US market has a decline of 10% or more on average every 18 months with recovery times after a sell off usually within a period of months rather than years.
The recent volatility comes after an unusually stable and prolonged period of strong share market returns. Accordingly, we take the opportunity in this report to remind clients of the fact that investors are rewarded for bearing market risk (volatile periods) over long horizons. Past evidence confirms that staying the course with an appropriately weighted portfolio for your circumstances is required to harness these long run rewards.