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Balancing opportunity,  volatility, and perspective: A guide for navigating today’s markets

Balancing opportunity, volatility, and perspective: A guide for navigating today’s markets

| November 07, 2022
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Build a plan to pursue your goals through all market cycles

Global investment markets can be especially turbulent during periods of rapid economic change, such as the reaction to the COVID-19 pandemic in the first quarter of 2020 and, most recently, central banks’ raising interest rates.

Sharp movements up or down in the stock market can challenge even the most seasoned investors. When market conditions appear to become unfavorable or economic news becomes unsettling, the uncertainty can prompt investors to head for the exits and ask questions later. But history shows that the stock market has withstood the test of time. Staying focused on long-term goals can help you through turbulent markets. As the chart below shows, the S&P 500® Index has continued an upward trend over the long term despite periods of stock price decline. Bull and bear markets haven’t lasted forever, and investing opportunities have often followed periods of market uncertainty. While market downturns can be discouraging, long-term trends show that the stock market has rewarded investors over time.


Navigating the unknown

Global financial markets have been on a roller coaster ride since the start of the pandemic. After dropping 34% during the February to March 2020 time period, the financial markets saw one of the strongest recoveries, hitting record highs in 2022.

Since the pandemic, the world has changed – from supply chain constraints to the Russian invasion of Ukraine to valuations and inflation hitting multi-decade highs – our lives and economies have transformed. In an effort to contain high inflation, the US Federal Reserve is currently on a path to increase interest rates to levels not seen in many years.

This truly is an unprecedented time to invest and navigate the financial markets. The economic landscape continues to evolve, and heightened market volatility reflects this uncertainty. It can be hard to maintain a broad perspective when markets are unsettled. However, it is important to remember that your investment timeline probably extends longer than next week or next year – or for some of you, it could even be 5, 10, or 20 years. Long-term investors who use history as a guide recognize that staying focused on financial goals requires the ability to navigate through all market cycles.


Let time work for you by staying invested

Some people believe investing is a matter of timing. Some also say it’s best to invest heavily in stocks when the market is going up, then get out when the market starts going down. But there’s a problem with that strategy: Even the smartest professional investors can’t accurately predict the exact timing of such market moves.

We believe long-term investment success is more likely to be the result of a consistent approach, based on time in the market – not market timing. For example, selling when markets decline can put you on the sidelines when stocks change direction. Turnarounds can happen quickly and are typically strongest in their early stages.

Missing even a few of the stock market’s best single-day performances could have a significant effect on your portfolio.


Stay committed to your plan – good years have tended to follow bad ones

History shows that it’s rare for the stock market to have two bad years in a row, and even more rare to record three bad years in a row. And when the market has recovered from downturns, it has historically done so with powerful rallies.

Even in the worst 20-year period the stock market has ever experienced – 1928 to 1948 – the S&P 500 Index posted an average annual gain of 0.55%. While this was a modest return, remember that those two decades included the crash of 1929 and the Great Depression of the 1930s, when unemployment soared to 25%, US gross domestic product plunged by more than 30%, and land values plummeted more than 50%.

Despite the economic challenges of those difficult years, a patient and committed investor could have had a positive return on money invested in the stock market during
this period.



Use history as a guide when reviewing your investments


Bull markets historically have lasted three times longer than bear markets.

While bear markets can test even the most steadfast long-term investors, they have historically lasted only a short time when compared with the duration of bull markets.

As you can see in the chart below:

  • Prior to the COVID-19 pandemic, the nine down markets since 1970 lasted an average of just 12 months.• Prior to the COVID-19 pandemic, the nine down markets since 1970 lasted an average of just 12 months.
  • The 10 up markets during that period lasted an average of 51 months, ranging from as few as 21 months to as many as 130 months.• The average bull market gained 158% while the average bear market lost 27%.


Focus on the future and diversify your investments

A mix of investments can provide the potential to take advantage of return differences among investment types and help protect you against possible price swings. While diversification does not ensure a profit or protect against loss, it can help reduce the overall risk and volatility of your investment portfolio.


Let’s look at the growth of $10,000. A hypothetical diversified portfolio of stocks, bonds, and money market securities would have helped manage market volatility during this turbulent 20-year period.


Change may bring opportunity

We live in a time of rapid change, economic growth, and technological innovation. Such factors often bring opportunity for the right companies and potentially for investors.


History shows that patient investors who remain focused on the long term may withstand turbulent periods and take advantage of the opportunities that global change can bring.


Our investment teams use a disciplined, research-driven process to track global change and its potential opportunities. You can work with your financial professional to create a plan to help you find the right investment opportunities for your long-term goals.

This market commentary has been prepared for general informational purposes by the authors, who are a part of Macquarie Asset Management (MAM), the asset management business of Macquarie Group (Macquarie), and is not a product of the Macquarie Research Department.
This market commentary reflects the views of the author and statements in it may differ from the views of others in MAM or of other Macquarie divisions or groups, including Macquarie Research. This market commentary has not been prepared to comply with requirements designed to promote the independence of investment research and is accordingly not subject to any prohibition on dealing ahead of the dissemination of investment research.


Nothing in this market commentary shall be construed as a solicitation to buy or sell any security or other product, or to engage in or refrain from engaging in any transaction. Macquarie conducts a global full-service, integrated investment banking, asset management, and brokerage business. Macquarie may do, and seek to do, business with any of the companies covered in this market commentary. Macquarie has investment banking and other business relationships with a significant number of companies, which may include companies that are discussed in this commentary, and may have positions in financial instruments or other financial interests in the subject matter of this market commentary. As a result, investors should be aware that Macquarie may have a conflict of interest that could affect the objectivity of this market commentary. In preparing this market commentary, we did not take into account the investment objectives, financial situation or needs of any particular client. You should not make an investment decision on the basis of this market commentary. Before making an investment decision you need to consider, with or without the assistance of an adviser, whether the investment is appropriate in light of your particular investment needs, objectives, and financial circumstances.


Macquarie salespeople, traders and other professionals may provide oral or written market commentary, analysis, trading strategies or research products to Macquarie’s clients that reflect opinions which are different from or contrary to the opinions expressed in this market commentary. Macquarie’s asset management business (including MAM), principal trading desks and investing businesses may make investment decisions that are inconsistent with the views expressed in this commentary. There are risks involved in investing. The price of securities and other financial products can and does fluctuate, and an individual security or financial product may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international or local financial, market, economic, tax or regulatory conditions, which may adversely affect the value of the investment. This market commentary is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in this market commentary. Opinions, information, and data in this market commentary are as of the date indicated on the cover and subject to change without notice. No member of the Macquarie Group accepts any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this market commentary and/or further communication in relation to this market commentary. Some of the data in this market commentary may be sourced from information and materials published by government or industry bodies or agencies, however this market commentary is neither endorsed nor certified by any such bodies or agencies. This market commentary does not constitute legal, tax accounting or investment advice. Recipients should independently evaluate any specific investment in consultation with their legal, tax, accounting, and investment advisors. Past performance is not indicative of future results.


This market commentary may include forward-looking statements, forecasts, estimates, projections, opinions, and investment theses, which may be identified by the use of terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “can,” “plan,” “will,” “would,” “should,” “seek,” “project,” “continue,” “target,” and similar expressions. No representation is made or will be made that any forward-looking statements will be achieved or will prove to be correct or that any assumptions on which such statements may be based are reasonable. A number of factors could cause actual future results and operations to vary materially and adversely from the forward-looking statements. Qualitative statements regarding political, regulatory, market and economic environments and opportunities are based on the author’s opinion, belief, and judgment.


Investing involves risk including the possible loss of principal. The investment capabilities described herein involve risks due, among other things, to the nature of the underlying investments. All examples herein are for illustrative purposes only and there can be no assurance that any particular investment objective will be realised or any investment strategy seeking to achieve such objective will be successful. Past performance is not a reliable indication of future performance.


Diversification may not protect against market risk.


Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of a portfolio’s investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries. These disruptions could prevent a portfolio from executing advantageous investment decisions in a timely manner and could negatively impact a portfolio’s ability to achieve its investment objective. Any such event(s) could have a significant adverse impact on the value and risk profile of a portfolio.
Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.
The Bloomberg US Treasury Bills 1-3 Month Index measures the performance of public obligations of the US Treasury that have a remaining maturity of greater than or equal to 1 month and less than 3 months.
The Bloomberg Long US Treasury Index measures the performance of US Treasury bonds and notes that have a remaining maturity of 10 or more years.
The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value and is often used to represent performance of the US stock market.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
All third-party marks cited are the property of their respective owners.
Macquarie Asset Management (MAM) is the asset management division of Macquarie Group. MAM is a full-service asset manager offering a diverse range of products across public and private markets including fixed income, equities, multi-asset solutions, private credit, infrastructure, renewables, natural assets, real estate, and asset finance. The Public Investments business is a part of MAM and includes investment products and advisory services distributed and offered by and referred through affiliates which include Delaware Distributors, L.P., a registered broker/dealer and member of the Financial Industry Regulatory Authority (FINRA) and Macquarie Investment Management Business Trust (MIMBT), a Securities and Exchange Commission (SEC)-registered investment advisor. Investment advisory services are provided by a series of MIMBT. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide. Delaware Funds by Macquarie refers to certain investment solutions that MAM Public Investments distributes, offers, refers, or advises.
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