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Can market falls present buying opportunities?

one month ago

Over time, there have been various occasions where we have seen large falls in the price of the stock market. Some - such as the 2008 Global Financial crisis - have taken a long time to recover from, whilst others have been relatively short-term and reflective of the natural volatility all investors experience when investing in the stock market.

Whilst some investors may naturally be concerned by market falls, others see them as potential buying opportunities, taking advantage of the cheaper prices.

As the chart below shows between the start of 1990 and the end of October 2022, each time there has been a monthly fall of 10% or more, the median 1-year returns following the fall have been far higher than the annualised returns for markets.

Impact of investing after market corrections graph

Source: Bloomberg, total return data from 01.01.1990 -31.10.2022 in USD. Past performance may not be a reliable guide to future performance. The value of investments, and any income, can go down as well as up and your client may not get back the amount they invested. Point of investment is the start of the next calendar month after market fall of 10% in previous month. 

 

Whilst this has been seen most strongly in the US equity market, it has also been shown in global, emerging and Asia pacific ex-Japan markets.

Investing shortly after a market fall can be daunting, however, rather than being a time to sell, it’s worth remembering that falls in the market can potentially present investors with good buying opportunities.

 

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