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By Suzean Haumann*
I work alongside a force in the wealth management industry, someone I look up to and turn to for advice and guidance, Magnus Heystek. He recently tweeted that he has experienced several market crashes (the last 7 to be exact) and in his opinion, the current market correction is the worse in its global impact. Unlike veterans of the industry, I have only experienced three of these during my career in financial services; the aftermath of 2008, Covid-2020 and (I call it) HURRICANE 2022. Below is a summary of the past market corrections since 1929 – the 2022 correction isn’t the worst by far… so why does this one feel SO bad?
| Past market corrections | ||
| Start | Months lasted | S&P 500 Change |
| September 1929 | 32.8 | -86.20% |
| March 1937 | 61.8 | -60.00% |
| May 1946 | 36.5 | -29.60% |
| August 1956 | 14.7 | 21.50% |
| December 1961 | 6.5 | -28.00% |
| February 1966 | 7.9 | -22.20% |
| November 1968 | 17.8 | -36.10% |
| January 1973 | 20.7 | -48.20% |
| November 1980 | 20.4 | -27.10% |
| August 1987 | 3.3 | -33.50% |
| July 1990 | 2.9 | -19.90% |
| March 2000 | 30.5 | -49.10% |
| October 2007 | 17 | -56.80% |
| March 2020 | 1.1 | -33.90% |
| 2022 | … | -23.80% |
In my opinion, the current market conditions are hitting investors harder because of everything else that is happening globally. The world was still recovering from a 2-year global pandemic and suddenly, we were facing a war in Eastern Europe, rampant high inflation, and sky-high interest rates. Mentally everything became just too much too soon. We are experiencing higher fuel, food and electricity prices, not to name the constant load shedding that is not helping South African businesses or its people. It is a depressing scenario.
So, what do I do and what is my advice to my clients?
As mentioned, I joined the industry in the aftermath of the 2008 crash, the 2020 crash was over so quickly, and the subsequent market growth was so phenomenal that most investors almost forgot the February-March 2020 blip. Through all these episodes we (I) have been urging our clients to not make any emotional and rash decisions. It is better to stay on course and keep your investment objectives in mind. Certain changes within a portfolio are sometimes required but selling everything and moving into cash is never the answer. Following big market corrections in the past, the world has seen astounding growth between these double-digit corrections. To name a few: 1991 to 1997 the S&P delivered 302% growth, in 2003 to 2007 the S&P delivered 112% growth and the graph below shows the recovery between March 2020 to December 2021.
If an investor sold out at the bottom in March 2020, they would have missed some of the biggest market recoveries. Unfortunately, we don’t have crystal balls and we can’t predict when the markets will bottom out or when the recovery will start, therefore our advice remains to stay invested because the chances that you “call” the market correctly is very slim.
So, if market volatility feels scary and makes you second guess your long-term investment strategy, have a good think before you get out of the market. There could be a 70% chance you’ll miss one of the best days. Wealth is not created in a year; it is created over decades.
* Suzean Haumann, CFP®, is Head of Brenthurst Wealth Tygervalley.
