That investment valuation declines precede recoveries is an undisputed historic market fact. We published this article for the enlightenment of our clients in October 2008, during the distressing days of the GFC. Our intent was to engage with them and help them see aspects other than the negativity rife at the time. We have refreshed, even updated the article as a nostalgic ‘hindsight reflection’ and as a reminder.
Investment markets are no different from any other asset in that ‘valuation’ is a point-in-time measure. This fact serves as a reminder that ‘time in the market’ often proves a better approach than ‘timing the market’.
To the extent that investment valuation is being monitored, it is useful to –
- remain aware of the original timeframes set for the investment goals to be achieved through the strategy – and
- it is primarily in that context, the extent to which any investment valuation declines need to be a concern.
Failing Memory excludes past market recoveries!
Fundamentally, the Australian economy is often in much better shape than previous recessionary episodes. Time can dim our memories. Economic strains that existed in the early 1990s were a greater risk to Australia than was the global financial crisis.
Investor anxiety elevates over uncertainties in both the global and local economy during market downturns. At such times it is useful to reflect on the wisdom of an experienced central banker. He stated that it always feels worse in the present. His words were to the effect –
- ‘the current episode always feels worse because we know how past episodes finished, whilst
- the (current) script is still not complete‘.
In sporting parlance, we are watching the game live rather than reliving old memories. This is a recipe that increases the stress and tension of the moment.
Investment valuation is a point-in-time measure that should serve as a reminder that ‘time in the market’ may be of greater importance than attempts at ‘timing the market’.
Anonymous
Declines precede recovery
The weakness seen in the Australian economy since March 2008 led to some comparisons with previous periods of hardship in Australia. The 1993 and 1982 recessions were prominent in reporting and conversations. Most market participants who worked through the early nineties markets concluded that the GFC event ‘felt’ more serious. We need to be reminded, however, that time heals old wounds. A side-by-side comparison leads to a more objective conclusion. And from that, take reassurance that previous investment valuation declines have preceded recoveries.
To read more of this October 2008 article from J B Were Asset Management, click the following link: FailingMemory-JBWere-article.
You can take advantage of investment valuation volatility (remembering that inevitably declines precede recovery). Have your investment portfolio reviewed by one of the experienced adviser team at Continuum Financial Planners Pty Ltd. To arrange an appointment with one of our advice team –
- phone our office on 07 3421 3456; or
- at your convenience, use the Book A Meeting facility.
(This article was originally posted by us in October 2008. We occasionally update/ refresh it, most recently in July 2025.)