The Story of Market Ups and Downs
The stock market has always moved in cycles. Over the last 45 years, we have seen periods of sharp growth followed by years of weak returns. For example, from 1979 to 1992, the Sensex delivered a huge 33% annual growth. (see the image below)
But right after that, from 1992 to 2002, the market went into a down cycle with an average return of minus 3% per year. These patterns keep repeating and remind us that no growth phase lasts forever.
Learning From Past Cycles
History shows how quickly things can change. Between 2002 and 2008, the market gave a massive 49% annual return. But this was followed by 2008 to 2012, when returns fell sharply to minus 5% per year. Then came 2012 to 2016 with moderate 12% growth, followed by 2016 to 2020 with only 4% growth. Most recently, we saw four and a half years of very strong 32% growth. Each time the market is in an up cycle, investors feel the bull run will never end, but sooner or later, a slowdown arrives.
How Other Assets Perform in Down Cycles
When the stock market goes into a down cycle, other assets like gold and debt often perform better. For example, between 1992 and 2000, debt investments did quite well while gold gave modest returns. From 2008 to 2012, gold was the star performer, growing by 24% while debt gave 6%. In 2016 to 2020, both gold and debt gave about 8% returns. Even in the current slowdown phase, gold is once again showing strength, although debt is not as strong.
Why Setting Expectations Matters
It is important to set the right expectations during weak market phases. Down cycles are not permanent. They are often followed by strong bull phases where investors can make big gains. The key is to stay calm, stay patient, and not lose faith during tough times. If one prepares mentally and financially during these slower periods, the next growth cycle can bring super returns.
Staying Invested for the Future
No one can predict exactly when the next up cycle will begin. It could be tomorrow, a year later, or even three years from now. What matters most is to remain invested and follow strategies that allow participation in the next growth phase. Those who stay invested through the difficult times are the ones who enjoy the full ride when the market takes off again.
