Equity investing in volatile markets

Why should I invest now, when markets
have been so volatile?

If you feel the stock market lows in 2009 were the worst you’ve ever experienced, you’re not alone. These kinds of lows have occurred in the past; however, the markets have historically rebounded. If you let fear keep you out of the market, you might miss out on the significant upside of such a rebound.


Strong returns follow historical lows

While returns like those you recently experienced in 2008 and 2009 are fortunately rare, they are not unprecedented.

The chart below shows 10-year rolling returns for the S&P 500 Index from 1939-2015.

Front of chart

Chart: Recent Long-Term Equity Returns Hit a Historical low

As the chart shows:

Extreme lows have happened three times, about once every 35 years, in 1939, 1974 and 2009.

If you had invested at these historic equity lows, you would have had strong returns in the following years. This has been true for the past two lows and so far appears to hold for the most recent low. For the last two occurrences, it was not too late to invest even 3 to 5 years later when the returns were still quite good.

For example, if you had invested 5 years after the previous two lows you would have returned 15.3% to 17.3% per year over the next 10 years.


Invest for the long term

It isn’t just short-term returns that have rebounded after a low. Historically, a decade with poor returns is followed by a positive decade.

The chart below shows the worst 10-year periods of the S&P 500 Index since 1926 and shows subsequent 10-year performance.

Back of chart

Chart: Positive returns have followed historic lows

As the chart shows:

In previous historic market lows, bad decades (indicated in purple) have been followed by at least two positive (5%+ annualized performance) decades (indicated in green).


Points for professionals

  • Talk to your clients about the historical returns after a declining market.
  • Point out to them that short-term and long-term returns have been positive following a loss.
  • Encourage them to get back into the market after these market lows.
  • Consider BlackRock product solutions
  • Suggest an appropriate investment strategy for their situation.
  • Contact your BlackRock representative.
More conversation starters
Address your clients' concerns with our scenario-specific charts and talking points.
More conversation starters
Address your clients' concerns with our scenario-specific charts and talking points.