Columbia Threadneedle: Looking ahead Financial markets

Columbia Threadneedle: Looking ahead Financial markets

23 juni 2020

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10%: That’s the approximate average annual return of the S&P 500 Index, the standard measure of stock performance in the US, since its 1926 inception date[1]. The key word here is average: there have been a lot of dramatic ups and downs over those 94 years. It is also testament to the power, consistency and resilience of the stock market — the rate is so robust that long-term returns for stocks have outpaced other major asset classes, such as bonds and commodities, by a wide margin. However, Staying invested is, of course, easier said than done.

We learned from investing through bear markets, but also the lessons from 2020 have help us to put things in perspective and suggest a likely path forward. Each decline has its own unique aspects, so the related recoveries are also unique. But based on observations and data for the most recent structural bear markets (1987, 2001–2002 and 2008–2009), we believe there are patterns that could recur:

  • Defensive stocks tend to lag, while cyclical stocks tend to lead
  • Cyclical and value quantitative factors may perform better than momentum and growth factors
  • In the early days of a recovery, investors may avoid the sectors and industries that led the decline
  • Winners and losers sometimes defy easy classification
  • It may pay to focus on quality in fixed income
  • Volatility is likely to continue

 

[1] Source: Columbia Threadneedle Investments. 

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