Easter is a very sacred time for Christians. It represents a chaotic, angry time during which much pain was inflicted, resulting in the death of Jesus Christ and his subsequent entombment and resurrection. The Easter egg has become a favourite symbol of hope and new beginnings; of a ‘resurrection’ or the reminder that bad times will pass.
Easter is a quiet time – probably the quietest time of the year in predominately Christian countries. In Australia, the shops are closed and people take time out to reflect.
The key message of Easter is hope – faith in the future, and a new beginning.
There are many times investors would be well advised to remember this message. There are often times where there is nothing to do but sit on the sidelines, and have some faith.
Chaos is part of life
On average, investment markets will have at least some ‘chaos’ once every four years. There will be negative returns and some market pessimism that will test the resilience and faith of investors.
Market corrections are fairly regular and mostly accepted by investors as a part of investing. Most investors don’t enjoy them, but they accept these times as they usually don’t last long. A case in point was October to December 2018, when the markets fell around 10%. On a less regular basis, the downturns are more dramatic. A recent example of this is the 2008 GFC when markets fell 50%, and many investors would have watched their portfolio values fall by 20% or 30% during this time.
As it is with any time of stress and pressure, people react in different ways. Some panic, and flight mode takes over. They lose faith in their portfolio asset mix and make changes. Others see the falling prices as major opportunities and double down. But most stay on the sidelines in the belief that the markets will come back. They have faith.
It often takes longer than the three days that it took Jesus to rise from the dead for markets to recover. In the past 70 years, the average bear market has lasted 14 months and prices have fallen on average 33%.
In the past 100 years, there have been eight bear markets ranging in duration from six months to nearly three years. The worst was in the Great Depression, where prices fell nearly 84%.
Most investors alive today have recent experience of two of the most significant and scary crashes. Some may even have experienced three, if they were investors in 1987.
The GFC crash in 2007/8, which saw market prices down 50% over a 16-month period, and the dot-com crash in 2002 where prices fell 44%, have both had a positive impact on most investors who experienced them. They have learned that significant corrections occur, but prices rebound. All they have to do is have some confidence in their assets, and their portfolio diversification.
Believe in something
Like spiritual people, investors have to believe in something. Nature abhors a vacuum and this is true of investing. People will either have blind faith that capitalism will survive and as a result markets will rebound, or faith in an evidence-based process.
One thing is sure – the occasional chaos of markets cannot be avoided. There is no way to be out of the market when it is going down and in it when it is going up. Many investors want this – some try to achieve it – but most accept it’s not possible.
“[There is] no joy without suffering” is a Buddhist philosophy, and together with the key messages of ‘hope’ or ‘a new beginning’ with Easter, perhaps investors can think on the symbolism of the Easter egg when the next correction comes.