The Mercer Periodic Table of Annual Investment Returns for New Zealand Equity Markets from 2012 to 2021 is shown in the chart below. This is similar to the Australian version of this chart we reviewed a few weeks ago.
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Source: Mercer
An interactive version of the above chart and other valuable charts can be found at their site here.
Related ETF:
Disclosure: No positions
A correction is defined as a decline of 10% from recent market highs. Bear markets are market declines of 20% or more. Equity markets go through plenty of market corrections over the years. But very few of the corrections actually turn into bear markets.
The following chart shows that since 1974 there have been many corrections but only five turned into bear markets:
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Source: Market Correction: What Does It Mean?, Schwab
Another important factor to remember is bear markets tend to be shorter than bull markets. This is because stocks usually tend to go up over the long term.
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Source: Market Correction: What Does It Mean?, Schwab
The key takeaway is that market corrections are normal and is a feature of equity markets. In fact, corrections can also be healthy as they tend to clear out speculators and other short-term traders. For long-term investors the trick for success with equity investing is to endure market corrections and avoid selling out in panic. Patient and smart investors in fact take advantage of corrections to add stocks at cheaper levels. Similarly investors that continue to hold through bear markets can recover the losses when markets eventually recover.
Australia is known as the “Lucky Country” for good reason. It is rich in many natural resources and all one has to do dig them up and export. I came across the following fascinating chart on the Australian export mix in the past two centuries.
Gold and Wool dominated exports for much of the 1800s. Since the 1970s iron ore, coal and oil & gas have become major export commodities.
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Source: Australia’s bounty: is it just diversified luck? by Ashley Owen, Stanford Brown and The Lunar Group
Australia is the world’s largest producer and a major exporter of iron ore. One of the critical components of construction and infrastructure industry steel is made from iron ore. Prices of iron ore have fallen to $90 per ton as of early December due to reduced demand from China. Further price declines are expected. As a result, though Australia’s export volumes is projected to increase in the future the overall earnings from export will actually fall with further declines in prices.
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Source: Resources and Energy Quarterly December 2021, Department of Industry, Science, Energy and Resources, Australian Government
Canada is a resource-based economy. The S&P/TSX Composite Index is comprised of over 30% with the energy and materials sector. Natural resources worth billions of dollars are exported every year. The following infographic shows 10 facts on the Canadian minerals sector:
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Source: Natural Resources Canada