Is now a good time to invest? It’s one of the most common questions long-term investors ask when headlines turn negative, and share market resilience is the reason the answer is so often yes. Markets have a long history of recovering from downturns well before the economic news catches up, which is why understanding how markets actually behave matters more than reacting to any single headline.
Why Markets Don’t Always Follow Economic Headlines
It can be easy to get swept up in a wave of negative headlines: high inflation, rising interest rates, geopolitical conflict, or the prospect of recession. But it is important to understand that the economy is not the share market.
Share markets are forward-looking. They are much more interested in what the future holds than in dwelling on what happened in the past, or even right now. Prices move on expectations, not on yesterday’s news, which is exactly why markets can rise while economic headlines stay grim, and fall while the economy still looks strong on paper.
Historical Evidence of Market Resilience
Stock market crash history tells a consistent story. Consider the 2008 Global Financial Crisis: a recession was not officially announced in the US until December 2008, by which time the share market had already fallen 42%. By the time it was announced the US was out of recession, the share market had already recovered 54% from the bottom. The market moved first in both directions, well ahead of the official economic data.
A more recent example played out through 2022. By mid-December that year, global share markets had recovered around 15% from their mid-year lows, even as headlines were dominated by high inflation, rising interest rates, the war in Ukraine, and a wave of global redundancies, including major layoffs at Amazon and Meta. Technology had its own reckoning in that period. The FAANG companies (Facebook, Amazon, Apple, Netflix and Google), which had seemed untouchable through the 2010s, fell sharply from their 2021 peaks: Meta down 68%, Amazon down 50%, Apple down 19%, Netflix down 60% and Google down 32%. Investors sometimes call this kind of sudden repricing after a long, unsupported run a “Wile E. Coyote moment,” after the cartoon character who keeps running past the edge of the cliff until he looks down.
Both episodes reinforce the same lesson: markets reprice quickly, often well before the underlying economic story is fully understood, and periods of sharp correction have historically been followed by recovery.
What This Means for Long-Term Investors
These episodes also reinforce a key investment concept: a struggling company can make an excellent investment at the right price, while a wonderful company can make a terrible investment at the wrong price. Following the 2022 correction, many of the world’s largest companies migrated from being categorised as Growth companies to Value companies, primarily due to the fall in their share prices, making them more attractively priced relative to their earnings.
While we will always maintain broad diversification in your portfolio, we tilt towards Value companies: buying good companies at the right price rather than chasing the most popular names. It’s a disciplined way to take advantage of these repricing events rather than being unsettled by them. This is the core lesson for long-term investing in Australia: markets move first, and the news catches up later.
Building a Resilient Investment Strategy
In markets, nothing is as dependable as cycles. Over time, the economy will continue to expand and contract, and markets will rise and fall. We position your portfolio to capture long-term market returns delivered through these cycles, continually adjusting it to stay weighted towards profitable, appropriately priced companies with higher expected long-term returns. This approach is backed by decades of evidence and Nobel Prize-winning research into how markets behave, not by predictions about what will happen next.
The question is rarely whether now is a good time to invest. It is whether a portfolio is built to capture returns across the whole cycle, not just the comfortable parts of it. History continues to teach the same lesson through every downturn: take a long-term approach, and stay optimistic about markets. Despite every challenge and crisis of the past 100 years, markets have consistently recovered and endured to create wealth and prosperity.
If you would like to understand how your own portfolio is positioned to weather short-term volatility, explore our investment management approach or speak with our investment team.
This article contains general information only and does not constitute personal financial advice. Your circumstances are unique. Speak to a qualified adviser before making financial decisions.
