Joe Biden picked Kamala Harris as his running-mate in the upcoming election battle last week. The former lawmaker is viewed as a moderate voice by many observers, and her appointment has gone down well on Wall Street.
China has recovered faster than most major economies, helped by stringent lockdowns that prevented the spread of the virus. Even so, data released on Friday showed that Chinese shoppers spent less than expected last month.
It’s been a tumultuous year for stock market investors. A bull run that had lasted nearly 11 years came to a shuddering halt in early February as the COVID-19 pandemic hit. What followed was the shortest and sharpest correction in stock market history; but quick action by governments and central banks then saw a rapid bounce back.
When stock market shocks happen, the risk is that investors’ emotions take over. They might panic and sell at the first sign of trouble. Or they might attempt to time the market and buy low, hoping to sell for a profit when prices recover.
But losing your nerve or trying the time the market can prove very costly. And this time was no different because, just like previous stock market crises, some of the biggest market moves – in either direction – happened in just a few days. Whether or not you are invested on those days can make a big difference to your long-term returns. The problem is that no-one knows when they are going to happen.
As the chart below shows, a notional investment of £1,000 into the S&P 500 index on 1 January would have been worth £1,065 by 23 July, if it had been left alone as the markets gyrated. Yet, missing just the ten best days of returns over that short period would have reduced the investment to £616.
Source: Bloomberg. Data shown is for the S&P 500 Total Return Index. Past performance is not a guide to future returns. Illustrative index returns do not take account of the costs and charges of investing.
|S&P 500 Index discrete one-year returns|
|Jul 2019 – Jul 2020||Jul 2018 – Jul 2019||Jul 2017 – Jul 2018||Jul 2016 – Jul 2017||Jul 2015 – Jul 2016|
Source: Financial Express Analytics. Data shown for the S&P 500 Total Return Index. Past performance is not a guide to future returns.
The best periods for stock markets often follow some of the worst days. However, if you react to the bad days, you are very likely to miss the good ones. Of course, it can be difficult to sit tight as your investments fall in value. But history shows that, to achieve your longer-term financial goals, you need to stick to the plan for how long you intend to invest.
In The Picture
No major economy has emerged unscathed from the pandemic, as revealed by recent economic data.
The Last Word
We are determined to work through the challenges imposed on us by this year’s circumstances and to select fairly those students of greatest potential who will thrive in their studies here.
The University of Oxford admits over half of the students who, unable to sit their A-level exams, were awarded lower-than-expected grades by a government algorithm. Many of these students come from disadvantaged backgrounds.
Wasatch is a fund manager for St. James’s Place.
The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.
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