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Managing A Bullish Market

Amadeus Technologies Launches Investment and Insights Tool Based on Machine Learning and Strategy Algorithms

By Ewan Rosie, Head of Advice, Cooper Parry Wealth.

COVID 19 has transformed the way businesses work with their customers and their employees. And with this evolution has come a rise of new terms in the media – ‘new normal’, ‘shielding’ and so on. In the finance industry there’s enough jargon to last a lifetime and it can be hard to truly understand what’s going on.

Cooper Parry Wealth has been advising clients during these uncertain times in a way that is easy to digest and simply explains the facts – without the media noise!

Two of these terms are ‘bear’ and ‘bull markets’ – what do they really mean?

The terms ‘bear-market’ and ‘bull-market’ have begun to see a rise in visibility across the media due to the volatile performance of global stock markets. Whilst there’s no strict definition of the phrases, they’ve generally come to be known as:

  • Bear Market – When Prices are Falling: Stock Market Reduction of 20% or more. 
  • Bull Market – When Prices are Rising: Stock Market Increase of 20% or more.

Markets through the years

Vanguard recently released a chart, showing the UK stock market (FTSE All Share TR Index) over the last one hundred years and how many times it has changed from a bear to a bull market, and vice versa.

The graph shows that there are 103 bull market years, compared to 16 bear market years, with the highest being the eleven year period to October 1987, with 1,675% of growth.

This makes the outlook feel a lot less bleak! Of course, there will still be regional differences that will also depend on how certain countries are trying to help businesses through the COVID-19 pandemic. For instance, when it first broke out in January in China, the MSCI China Index saw a fall of just 18%, not entering a bear market and in the US, the S&P 500 Index has recovered strongly from its March low.

Where do we go from here?

The truth is that no-one can predict where markets are going to go in the short-term. But history tells us that we have always recovered from our most challenging times and you need to be invested at this point to fully benefit.

A well structured investment portfolio should be globally diversified to help you weather the storm of bear markets and this helps an investor behaviourally as it allows them to feel comfortable with the returns received, so they can keep their discipline and capture the recovery as and when it happens.

As things stand, we don’t know what the full impact of COVID-19 on the economy, or the world will be! But individuals and businesses are adapting and finding new ways to achieve their goals. Yes, there may be bumps in the road, but there always is on a short-term view. Keep a longer-term mindset, with strong discipline and investors will get their rewards.

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