Endurance
In August 1914, Sir Ernest Shackleton and a crew of 27 set sail on “The Endurance” for the Imperial Trans-Antarctic Expedition. This was the first attempt at a land crossing of the Antarctic continent. The crew journeyed from England, eventually departing a whaling station at Grytviken on the island of South Georgia. Two days later, in December of 1914, the vessel encountered polar pack ice. While prepared for such events, their progress slowed to a crawl. By January 1915, progress was all but non-existent and they were stuck drifting where the pack ice would take them. They were only 200 miles from their destination, but it wasn’t until October 1915 – a full 9 months later – that the pack ice would release the ship from its clutches.
Their vessel was badly damaged by the ice and the crew abandoned ship. The ship sank shortly after and they camped on the thick ice until it broke into pieces in April 2016. Then forced into their lifeboats, the men endured 5 challenging days at sea before landing at Elephant Island – the first time they had set foot on solid ground in 497 days.
Unfortunately, Elephant Island was an inhospitable place and there was little probability that they would be discovered and rescued. Desperate, Shackleton and 5 of the men set out on the 720-mile-open-ocean journey back to South Georgia. In May 1916, they successfully reached South Georgia and immediately set out to rescue the men still on Elephant Island. The 22 men stranded there were ultimately rescued in August 1916. “Endurance” by Alfred Lansing describes this harrowing tale and it’s a book worth your time. Years later, British explorer Duncan Carse attempted the route that Shackleton’s men had taken and said this about their achievement; “I do not know how they did it, except that they had to…”
While investing in this market pales in comparison to the life and death battle Shackleton and his crew faced, this equity market can make us feel like we’re drifting at sea hoping for rescue. We have been in a steady “risk-off” environment since mid-August with the last couple of weeks being more pronounced. The S&P 500 (along with other asset classes) recently retested and exceeded its prior June low. To that end, below is a 50-year history of other bear markets[1] (i.e. a decline of 20% or more):
Investors cannot invest directly in an index.
Since WWII, there have been 13 bear markets (including the current one). At present, we’re about 10 months into this bear market with the S&P 500 down ~24%. While the magnitude of the decline certainly impacts investors, the length of time the bear market lasts can have a substantive impact on the psyche of an investor. This requires endurance. The shortest 7 bear markets since WWII lasted just 16 months, but the longest 5 bear markets (Tech Bubble, Financial Crisis, etc…) lasted 55 months on average.[2] While we don’t know when this bear market will end, the ability to endure the volatility will help when we ultimately do. Every single prior decline had one thing in common – they all ended. This point can’t be stressed enough.
When a recovery begins (and it will), it often happens swiftly. Ned Davis Research commented, “34% of the market’s best days took place in the first two months of a bull market – before it was clear a bull market had begun.”[3] Whether the new bull market sets in today or we have more time to wait, our team is monitoring portfolios for opportunities to harvest losses and rebalance. As with past bear markets, you will endure this one. And if it’s any consolation, at least we’re not floating on an iceberg.
[1] Chart: Every S&P 500 Bear and Bull Market in History