The Siren’s songs have never been louder!
From the market pundits to the tactical asset allocation peddlers, the noise is deafening.
Take a leaf from Odysseus on his journey to Ithaca after the Trojan War: “She [Circe] said we must avoid the voices of the otherworldly Sirens; steer past their flowering meadow. And she says that I alone should hear their singing. Bind me, to keep me upright at the mast, wound round with rope. If I beseech you and command to set me free, you must increase my bonds and chain even tighter.”
Much like Odysseus, evidence-based investors must bind ourselves to the mast even tighter.
Thank the heavens, our mast isn’t just any old mast. It’s empirical data on capital markets spanning over a century.
Our rope is a rich tapestry woven by the wisdom of reputable academics and Nobel Prize winners, whose only agenda is to help the masses invest wisely and successfully.
We earn our keep during market stress and uncertainty. In times like these, when it’s all too easy to fall victim to the sirens songs of market pundits and tactical asset allocation peddlers, all screaming…
‘Buy Bitcoin!’
‘Sell the Mag 7!’
‘Underweight America!’
‘Overweight Europe!’
Yet, we must resist the allure and stuff our ears with beeswax that is the words of St Jack: “Don’t just do something. Stand there." I know this is hard. But that's the job. For as Queen Mary wisely quipped, “To do nothing is the hardest job of all. And it will take every ounce of energy you have.” We must always remember: we’re not managing money. We’re managing our clients’ fears, hopes, and dreams with £ signs.
As the world grapples with the prospect of a global trade war, sparked by the so-called reciprocal tariffs introduced by the US administration, it may feel like we’re staring down the barrel of the next major downturn.
Coincidentally, we recently published our latest Timeline Charts, a treasure trove of investing wisdom, beautifully visualised from 100 years of historical market data. So, what does the evidence tell us about how to approach periods of heightened market and political uncertainty?
1. Market declines are temporary, the long advance is permanent
With markets swinging wildly in response to new US tariffs and geopolitical tensions, it’s no surprise that many investors are feeling anxious, some even tempted to pull their money out and wait for calmer waters.
But history suggests otherwise. Time and again, it’s proven better to stay invested and ride out the storm.
Over a century of market data shows us one simple truth: the declines are temporary, the advance is permanent.
This chart highlights every major decline in the UK equity market over the past 100 years, from the Great Depression and oil shocks, to Black Monday, the Dotcom crash, the Global Financial Crisis, and COVID.
The pattern is striking: markets fall, yes—but they also recover. Always.
Of course, there are no guarantees. But history strongly suggests that temporary pain is often followed by a long and powerful advance.
A similar pattern holds true for the US market. In fact, Morningstar’s analysis of 19 bear markets in the US over the past 150 years arrived at the same conclusion: though market declines vary in length and severity, they always recover, and go on to reach new highs.
So, while headlines scream and nerves fray, remember: market declines may test our patience, but the long-term trajectory continues to reward those who stay the course.
At times such as these, it pays to heed the words of the legendary Jack Bogle:
“Don’t just do something. Stand there.”
2. There's always a reason not to invest.
The current stock market and broader economic outlook feel particularly uncertain—especially in the wake of global trade tensions sparked by tariffs imposed by the US administration.
The truth is, the world is almost always in a state of flux. There’s rarely a “perfect” moment to invest.
This chart captures more than 50 years of major economic and geopolitical crises—from the Watergate scandal and the 1976 Sterling crisis, to the Cold War, the fall of the Berlin Wall, Black Monday, Black Wednesday, the Dotcom Bubble, the European Sovereign Debt Crisis, the Global Financial Crisis, and COVID, to name but a few.
And yet, £1,000 invested in 19702 in a basket of global equities would be worth a staggering £263,000 as at Dec 2024.
You didn’t need to pick the winners. You didn’t need to time the market. All you had to do was buy a well-diversified portfolio, sit on your hands—and try not to die.
3.The capital markets don’t give a monkey’s about your stupid politics
Nor mine. Regardless of who’s in Number 10, the Élysée, or the White House, it pays to stay invested.
So when the next election cycle rolls around: If your side wins, celebrate, thank your God, and stay invested.
If your side loses, sulk if you must, protest peacefully if you will. But whatever you do, stay invested. Don’t cut off your nose to spite your financial face.
4. Market concentration is a feature, not a bug.
There’s been a lot of hand-wringing lately about how the Magnificent 7 (Nvidia, Alphabet, Amazon, Apple, Meta, Microsoft, and Tesla) have dominated US equity returns.
Some even say it's an existential threat to index investors. Cold hard data suggest otherwise. Research from Professor Bessembinder shows this is not new. Since 1926, just 3.4% of US stocks have accounted for all net wealth creation in the market.
And if you think that’s just an American quirk, think again.
Bessembinder’s global study of 64,000 stocks from 1990 to 2020 found that the top 2.4% of firms globally accounted for all the net wealth created over that period. Outside the US? Just 1.41% of firms were responsible for all net market gains.
The chart below illustrates how just the top 5% of public companies globally are not only responsible for generating the handsome net return received by the investor, they also paid back the losses of all the other lost-making companies!
Return concentration isn’t only the norm, it’s how markets work. Global equity index investors have no reason to lose sleep over it.
More on that subject, just here: Indexing & The Paradox of Concentration of Return
In summary, the treasure trove of data from the last century offers a colourful, humbling perspective—one that keeps us grounded, focused, and resilient on our individual investment journeys!
Because in the end, it’s not about outsmarting the market. It’s about tuning out the Sirens and staying the course.
1.What We’ve Learned From 150 Years of Stock Market Crashes https://www.morningstar.com/economy/what-weve-learned-150-years-stock-market-crashes
2.indexing wasn’t available to retail investors 54 years ago, St Jack Bogle only launched the first index mutual fund in 1974. But the principle holds: it pays to stay invested.
