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Unprecedented Times: Lessons from the Markets

Strategic Insights

— 2 min read

Volatility is a natural part of the investment journey, but recent months have seen some historic fluctuations. The S&P 500 fell by 20% before recovering to hit new highs, while the Volatility Index (VIX) reached 82.7% in March 2020 and 80.9% in 2008. Despite the dramatic falls, markets have been positive, with the S&P 500 increasing in value by 5.13% in the second quarter.

Key Takeaways:

  • The S&P 500 fell by 20% before recovering to hit new highs, highlighting the potential for dramatic market recoveries following major falls.
  • The Volatility Index (VIX) reached 82.7% in March 2020 and 80.9% in 2008, indicating that the recent volatility is not unprecedented.
  • A study by Fidelity found that staying fully invested in the FTSE All-Share index from January 2017 resulted in a return of 6.30%, while missing even 10 of the best days over that period dropped the return to 2.16%.
  • Relatively low inflation for over 30 years has tended to hide the effects of rising prices, and increases become almost imperceptible.
  • Over 20 years from 2003, the value of the £1 in your pocket dropped to 58p, highlighting the importance of considering the long-term implications of inflation.
  • The UK Government's proposal to limit the amount that can be saved in cash ISAs to encourage a greater take-up of stocks and shares highlights the importance of considering long-term risks.
  • Neil Burns, Associate Financial Planner, emphasizes the need to set realistic and achievable investment goals, build a robust and sensible plan, and focus on the long-term, rather than getting caught up in short-term volatility.

Statistics:

  • The US Standard & Poor (S&P) 500 market index fell by 10.53% in dollar terms over two days, one of the largest two-day falls since the German defeat of France in 1940 during World War Two.
  • The S&P 500 was up 5.13% in the second quarter, despite the April turbulence.
  • The Volatility Index (VIX) stood at 52.3% on April 8th, but dropped to 16.7% by the end of June.
  • The average value of a £1 in your pocket over 20 years from 2003 was 58p.
  • The £1 would have been worth 87p by 2023, had it not been for inflation.
  • The UK Retail Prices Index (RPI) inflation rate was 9.3% in 1990, and 13.4% in 2022.

Sources:

  • Dimensional - Midyear Review: Stocks' Climb Is Challenged During Volatile First Half: Jul 03, 2025
  • Fidelity When Doing Nothing is Best
  • Dimensional Matrix Book 2024
  • Acumen Financial Planning internal research

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