Since the bankruptcy of the US bank Lehman Brothers in September 2008, the Dow Jones, the oldest stock index in the world, has only known one direction: upwards. There was a brief and dramatic setback in March 2020, when the global spread of the Covid-19 pandemic became apparent, but the shock was short-lived. In general, share prices have recovered quite quickly after serious crises and wars. As analysts at Deutsche Bank calculated, prices collapsed by an average of 5.7 percent during crises and wars. On average, the bottom of the correction was reached after three weeks and after a further three weeks the old index levels were back up. So basically it wasn’t all that bad.
But the average values hide the fact that individual events could take longer. For example, the 1973 oil crisis, which had the longest recovery phase among the crises after the Second World War. On October 29, 1973, the stock market sell-off began, lasting 27 trading days and dragging the S&P 500 index down 17 percent. According to Deutsche Bank, it then took 1,475 trading days before the dent was ironed out again. After the attack on the World Trade Center in New York on September 11, 2001, it took the US stock market just 15 trading days to recover from the almost 12 percent drop.
Use entry opportunities
Despite the difficult framework conditions, one should not succumb to pessimism at the moment. Erich Stadlberger, Head of Private Banking & Asset Management at Oberbank: “The time for shares is not over. Investments in successful companies are a fixed component of the portfolio for all those who have a long-term investment horizon and are aware that one has to live with fluctuations on the stock exchange. We also see very different effects on economies and markets globally.
The concern in the USA, for example, is not as severe in this case as in Europe. That always speaks for international distribution and top quality in the company. You always have to ask the reverse question: could it be that now is a good time to enter?” In addition, the past has shown that central banks have pursued equity market-friendly policies. Long-term retirement capital continues to grow around the world, seeking profitable investment opportunities that are more likely to be found when prices are low.
After there is no more interest on the savings account, investors should take advantage of the opportunities on the capital markets. Werner Rodax, Managing Director at BAWAG: “Investing in securities is generally about longer investment periods, often ten years or more. We therefore recommend our securities clients to invest broadly. Course corrections always offer good entry opportunities.
Invest for the long term
However, we tend to advise against market timing and instead recommend our customers to stay invested for the long term.” In addition, newcomers to securities with fund savings plans should enter the stock markets, as this also results in a spread over time. Rodax: “Anyone who invests regularly uses the cost-average effect. This compensates for price fluctuations over longer periods of time. If it goes down, fund shares are bought much cheaper – if it goes up, fewer shares are bought because it’s more expensive.” In addition to gold and other tangible assets such as real estate, you should definitely continue to invest in shares. Stadlberger: “We are currently investing more heavily in the USA than in Europe and are adding emerging markets. This also applies to the sectors, never relying on too narrow a spectrum of companies.”