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Markets and slumps (like this year!), always relate it to history!

Markets go up and down and have periods when share prices don’t perform like investors would like. Here are some stats to understand this within the context of history;

  • In the long term, on average, the FTSE All Share moves up or down by more than 1% on 60 days of the year i.e. on nearly a quarter of all trading days.
  • 2017 was notably the calmest year on record. The market moved by more than 1% on only eight days.
  • 2018 has been a normal year so far; in fact it’s been a little quiet in terms of market movements, compared to the average.
  • Every year, the market falls below its peak, at some point. This is a reminder that markets can’t reach new highs every day. Historically, measured on a daily basis, the FTSE All Share spent 95% of the time below its previous peak.
  • The equity market has risen in over 70% of calendar years, with an average return of 16% (stripping out 1975, which was exceptional).
  • The average drawdown during a positive year for equities is -13%. Positive returns have materialised in some cases even where the market was as much as 20% down from its peak during the year.
  • Even in negative years, the final return has usually been a lot better than the lowest point would have suggested. The average market peak-to-trough fall is -26%, but the average return in negative years for equities is only -12%; following market slumps, things usually improve.

Stock Market History

  • There are two outlier years that are highlighted on the above chart, for shock value, and also, as a reminder that great years often follow terrible ones.
  • In 1974, the UK was in the depths of a recession, dealing with miner’s strikes, three-day weeks and an oil crisis.
  • The FTSE All Share crashed by 55% in that year.
  • In 1975, as the economy recovered, the FTSE All Share surged by 140%.

Stock Market Volatility

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