Gary Lucas Financial Advice | No. 1 Certified Financial Planner in Byron Bay

Financial Insights



Share Market Falls: How often can we expect them and how long do they last?


The period from March 2009 until 2018 spoilt many investors. Volatility was lower than normal, and most sharemarkets enjoyed strong and steady returns as they recovered from the GFC. Investing seemed easy because risks were reduced thanks to the support from Reserve Banks around the world; they lowered interest rates which pumped money into the economy.

This was not and is not normal and was even regarded by some as an experiment in economic management. What is normal? The table below outlines what we should expect from the US sharemarket, whose movements tend to flow on to other markets around the world. This in turn impacts superannuation account balances. Keep in mind that averages can be misleading, particularly in financial circles. As I have said before, an average is just a mathematical calculation and we rarely ever see the exact average number, just a whole lot of numbers either side which arrive at an average.


 Source: Matt Reynolds, Capital Group & Livewire Markets

At the end of 2018, the fall was around 20% in the US and 15% in Australia, but the length of the fall was close to 120 days. As bad as that was, it was actually below average!

Does this mean that we are in the clear for another four years? Definitely not. If you consider averages, and how there has been a period of almost ten years with below average falls, then we could conclude that we are in for a period of more frequent losses.

A higher level of care and planning is needed for Retirement Planning and managing your Superannuation, especially if you have a Superannuation Pension account.

Other messages include:

  • that the period from March 2009 to February 2018 was unusual and had below average falls in frequency and length.

  • financial markets were fuelled by considerable support from Reserve Banks; valuations are now high, and it is harder to see where growth will come from.

  • we should expect more volatility and further market falls.

  • keep in mind that some of the falls are minor and are recoverable in a reasonable timeframe.

  • investors need to be able to tolerate the falls, both financially and emotionally, otherwise they should reduce risk by adjusting the allocation of assets within their portfolio/s.

  • those who are in retirement phase need to be particularly careful because a large loss can have long-term impacts which are challenging to recover from.

I am happy to discuss how you feel about risk and make adjustments to tailor your portfolio to ensure that it really suits you.