What market optimism misses

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What market optimism misses | opinion

To make this make sense, again, several conflicting things have to be true at the same time. Recessions have to be, because of all the easier monetary policy they imply, and/or peak fear is over, and/or markets have already priced in sticky inflation and a hard landing.

a level that since 1960 has been consistent with annualised returns in a healthy 7-9 per cent range over the next decadeis also borne out in the historical data. Since 1960, a strategy that waited for a 10 per cent correction before buying the S&P 500 and then sold at a new all-time high would have underperformed a buy-and-hold strategy by 80x . Over the same time period, a strategy of investing immediately after a 20 per cent drop would have delivered an average one-year return of 15.

His chart here of how a theoretical 50/50 portfolio of US equities and government bonds would have performed over close to a century rather hammers home that point: “To me there’s no rush,” she said. “A number of the big goalposts are shifting. We never really appreciated the value of the globalisation [that we saw] after the fall of the Berlin Wall and the dissolving of the Soviet Union . . . Just-in-time supply chains were a huge benefit to consumers globally and to the profitability of businesses worldwide.”

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