The Russian invasion of Ukraine rattled the stock market last week. And on Thursday, the FTSE 100 shed 3.9% of its value to end the day at 7,207 points. So what should investors do? Well, not panic, for one thing. The very next day, the top London index regained 3.9%, and ended the week at 7,489 points.
That means the Footsie lost 24 points, or just 0.3%, in a week. That’s in response to a foreign invasion of a democratic country on the edge of Europe. And by none other than Russia, a nuclear power armed to the teeth. It’s a pretty resilient thing, the stock market, isn’t it?
We’ve now had a weekend of taking in the shock of last week’s events. We’re getting some clarity on their economic effects too. The price of a barrel of crude oil rose above $100 again, and prices at the pumps are higher. Fuel costs were already on the way up, and we really could do without any further economic squeeze.
But the UK stock market has gone through many economic squeezes in the past century and more, some far greater than we currently face. Sure, there have been some big dips. But if we look back at stock market charts over the decades, it’s actually quite hard to see them now. The long-term trend is just onwards and upwards.
Stock market strength
According to research by Barclays, the British stock market has beaten other forms of investment for more than 120 years now. What’s more, the longer the time slice we examine, the more often shares have outperformed cash in a savings account. Over rolling 10-year periods, the stock market has won out around 90% of the time.
The winning percentage for shares rises to 99% over 18-year periods. And over rolling 23-year periods, cash in the bank has never beaten UK shares. That’s over the entire 20th century and more. And it covers two world wars, the great depression, oil price volatility, and no end of worldwide crises.
Isolation
I have been wondering about one thing. What would I do if isolated from the world, solely with access to the goods and services I need to live? What if I heard nothing about the world outside of my personal horizon for another decade?
You know how my investing approach would change? Not one bit. I would carry on putting a bit aside every month, and making a new stock market investment every time I had a sufficient sum. Would I care if I saw the prices of shares falling for a few months and worry about what’s happening in the real world? Well, yes, or course I would. I can’t pretend I wouldn’t. But my confidence in the long-term strength of the stock market would mean I’d just carry on investing.
Cheap shares now?
The FTSE 100 has had a weak decade, and I think that’s left a lot of UK shares undervalued now. The resilience of the past week makes me think plenty more investors share that opinion. I’m going to carry on buying on the dips.
Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
