Many of us can cope with this year’s fall in share prices if it proves to be only temporary, but would feel much more uncomfortable if prices stay low. If you’re one of these people, history has a warning for you: prices can stay below their previous peaks for a very long time.
My chart shows the point. It shows that if we adjust for inflation UK share prices have sometimes spent whole lifetimes below their peaks: I’m taking data from the Bank of England. For example, prices did not return to their 1720 level until 1850, and only returned to their 1909 peak as recently as 1998 – since when, of course, they have slipped back. And it was only in 1989 that prices returned to their 1929 level.