On October 12, the global bull market marked its third anniversary, prompting reflections on key investment lessons drawn from this period. This celebration is not just a milestone, but also an opportunity to understand the dynamics that characterise bull markets.
Firstly, the emergence of bull markets does not rely on positive news. Three years ago, global stocks found themselves in a bear market, having fallen sharply after peaking earlier in the year. Despite this downturn, the subsequent recovery was driven not by an influx of good news but rather by a “better-than-feared” reality. In the face of ongoing recession forecasts and sustained inflation, the market began to rise again. Investors often underestimate the potential for recovery when faced with grim circumstances.
Secondly, old fears can linger long after market conditions improve. As noted by investment pioneer Sir John Templeton, the trajectory of a bull market often begins with skepticism and pessimism. The most recent bear market, rooted in inflationary pressures, has left a mark of caution among investors. Despite signs of easing inflation—albeit still above preferred levels—the hangover from previous market downturns continues to influence investor sentiment. Prices for essential goods remain a concern for many consumers, particularly those on fixed incomes, highlighting the ongoing impact of inflation on budgeting and financial stability. This persistent anxiety underscores the instinct to cling to past fears even as conditions improve.
Lastly, bull markets demonstrate remarkable resilience. Events earlier this year, such as tariff announcements, initially spooked investors, leading to market corrections. However, the subsequent recovery showcased the capacity of markets to bounce back after declines, often fueled by unforeseen realities that mitigate earlier fears. Indeed, volatility is an inherent feature of bull markets, reminding investors that while returns may be high over time, fluctuations along the way are to be expected.
As we reflect on the past three years, it is essential for investors to maintain a long-term perspective, keeping in mind that although concerns will always be present, the potential for growth in bull markets remains consistently strong. Embracing this resilience, while navigating through the noise of market commentary and fear, can pave the way for successful investment strategies.