Every year we hear the media’s views on what is likely to happen in the upcoming year, and every year they are almost certainly wrong. Whether they predict what will happen in politics, the world or in finance it will inevitably be so far from what actually happens there is little point in bothering. Who would have predicted that Notre Dame would burn down, Boris Johnson would win a landslide election and Britain would still not have left the EU?
With it being such great clickbait for news outlets to have stories that foretell of the devastation of the stock market there are plenty of them about. We’ve seen stories claiming that ETF’s are the next mortgage crisis for example, whilst in 2008, the disastrous crash that wiped billions from the stock market and collapsed the wider economy, completely blind-sided everyone. Such devastation is the kind of story the media loves to report, but what is better than to be able to say one foresaw it?
The only way one can guarantee to foresee a stock market crash is to keep repeatedly reporting that it will occur. What better time to do so than in January each year? That way if the market plunges to its doom, you can say I was right! As the old saying goes “Even a broken clock is right twice a day.”
Yes, the market had one of it’s best years in history, but is it more likely to crash or have a less successful year than last? The diagram below would indicate that the market grows on average more often than it falls.
The graphic shows that 40 out of the last 147 years were where the stock market shrunk. I would wager that the market is going to grow again. How much? I don’t know. With 2019 being in the same category as 17 other years we can see that while 2019 was good, it was not entirely uncommon for growth.
Past performance is no indication of future I hear you cry. Of course, you are correct but what the hell, we have to take risks and this is one I’m willing to take. I am making no predictions.
I’m going to keep investing in Vanguard ETF’s and hope that 2020 will be my 1954. If it is my 1937 then I’ll hold on tight and wait it out as the money I’m putting away is for the long term. Markets recover and the proof is in the chart above.
Update April 2021. If this article isn’t a time capsule for how quickly things can change I don’t know what is! Happily, I can report that 1 year after the crash Im up £115k. I held on for dear life, and it worked!