Well, Donald Trump is implementing his strategy of “Making America Great Again” and the equity markets don’t like it. With the markets going down we get the usual noises from the funds management industry and, unfortunately, some financial advisers with platitudes like “the market always goes up over the long term and rewards the patient investor”.
However, are these claims true?
Personally, I think the big swings in equity markets last week are a combination of other factors including valuation rather than Trump’s tariff policy in isolation. To this end, a recent report from Bridgewater Associates named “Investing in a New World: Capturing Opportunity and Weathering Uncertainty” identified that the last 15 years of share market returns have been the best for any 15-year period since 1970. The return being 12.2% per annum over that time.
Back to our question regarding the validity of the long-term “she will be right mate” claims.
Just a precursory look at the above diagram tells you there have been several periods over 10 years where the US equity market has returned negatively. I would also note this is in nominal terms (before considering inflation) so if the returns were reported on a real basis (after inflation) this would be even greater. I wrote a previous blog on the importance of considering real returns, not nominal returns.
A recent article “Are Stocks a Sure Thing Over the Long Term? Not Necessarily” by Meir Starman in the Wall Street Journal on 6th March 2025 deals with this very question. In summary, Meir stated, “There is a common belief that while US stocks can inflict painful losses in the short term, they are sure to deliver gains if you hold them for 10 years. And if not in 10 years, definitely 20 years.”.
“Unfortunately, this perception is a misperception”.
Amongst the observations noted in the article were the following;
- Researcher Edward McQuarie found that while 10-year losses in US stocks occur infrequently they do occur, including 120 months that ended in February 2009 when they lost a total of 37.4%
- McQuarie found that other periods of losses for the US share market over 10 years included September 1974, August 1939, June 1921, October 1857 and April 1842. These losses were in real terms (inflation adjusted) and ranged between 23 to 37.3%.
- McQuarie also found several periods of US Share market losses over 20 years including June 1932, October 1857 and June 1921.
- McQuarie also noted the following periods of losses on international bourses;
- Italian shares lost 78.2% for 20 years ending 1979.
- Japanese shares lost 64.3% in the 20 years ending 2009.
- Norwegian shares lost 74.1% during the 30 years ending 1978.
- German shares lost 21.5% in the 20 years ending 1980.
- Swiss shares lost 20.9% during the 30 years in 1991.
FACT CHECK: The claim that share markets always go up over a 10-year period is false.
I often say to clients that there is no free lunch in finance and the bigger the party, the bigger the hangover. According to the research conducted by Bridgewater this has been the biggest party since 1970 so I expect a lot of time on the lounge for investors watching tv feeling very sorry for themselves. If you hold an overweight position in equities, you need to get this reviewed as soon as possible to ensure that your portfolio is built for the upcoming challenges and that will help deliver your financial goals and objectives.
Article by: Rob Coyte, CEO, Shartru Wealth Management