The power of long-term investing

Since 28 February, the United States and Israel have launched strikes against Iran, which has responded by attacking Israel, US military sites in the region, and some neighbouring states. Those reported killed included Supreme Leader Ali Khamenei, whose son was named as successor by the Iranian regime, which remains in place. The full extent of military and civilian casualties is uncertain. At the time of writing, the Islamic Republic’s governing institutions remain operational. It is unclear when the conflict will end. US officials have cited objectives including degrading Iran’s nuclear and missile capabilities, and President Trump has also publicly raised regime change, though the precise end-state and timeline remain unclear.

Our thoughts are with everyone impacted by the conflict, including our clients. We sincerely hope that you and your families are safe and well during this difficult time.

Turning to markets, the price of oil has spiked, as maritime activity in the Strait of Hormuz, a critical artery for global oil supplies, has been severely disrupted. Equities have been volatile but have not crashed. Yields on US Treasuries have risen in response to fears that higher oil prices could fuel inflation. Gold rose initially but has been volatile. Many investors are understandably very uncertain

Reasons not to invest

There has almost always been a reason not to invest in risk assets. Reviewing the last 100 years, history has handed investors plenty of reasons to worry. Dangerous political, military, economic and financial events have come thick and fast (see chart). Yet since the end of 1927, the S&P 500, not including dividends, has risen by approximately 38,000%. That is a compound annual growth rate of 6.25%. 

Past performance does not predict future returns.

Source: Jupiter, Bloomberg, 31 December 1927 to 9 March 2026. S&P 500 Index (price return, dividends not included).

Long-term investing

Over individual one-year periods, equity returns are frequently negative. In fact, they have been negative 30.6% of the time, since 31 December 1927 (S&P 500 data without dividends).

But over longer time periods, the picture improves. Over 10-year periods, the occurrence of a negative return decreased dramatically, to 11.3%. Over 20-year periods, historically, the occurrence of loss was low, only 3.5%.

Past performance does not predict future returns.

Source: Jupiter, Bloomberg, as at 9 March 2026. S&P 500 Index (price return, dividends not included) since 31 December 1927, monthly data. 

Psychological bias

We tend to remember major negative events more than positive ones. Many vividly recall where they were during the September 11, 2001, attacks against the United States. Some of us may remember hearing the news that John F Kennedy had been assassinated on 22 November, 1963. Negative events stick in the mind. 

Prospect Theory states that investors value gains less than they fear losses. The emotional pain of losing money is greater than the joy of an equivalent gain. Investors are not purely rational. People suffer from recency bias, overweighting the most recent events. Dramatic headlines (rather than steady, long-term progress) can dominate people’s thinking. Myopic loss aversion causes us to focus excessively on short-term fluctuations rather than long-term growth. See my recent article on Behavioural Finance and Systematic Alpha for a deeper dive into investor psychology and its effect on markets.

Long-term resilience

Equity markets can be volatile. Yet most negative events have a relatively short-term impact in markets. Viewed through a multi-decade lens, global equities may be viewed as remarkable for their steady long-term rise. To be sure, some markets do stagnate: an example is Japan post-1990. But most world equity markets have proved an excellent investment over the long term.

Why do global equity markets exhibit resilience over the long term? They are not a nil-sum game but reflect growth in the real economy. When faced with challenges, businesses are adaptive. Companies innovate, cut costs, enter new markets and develop new technologies. Economic setbacks may interrupt progress but, at least in this period of human history, they rarely reverse it permanently. World equity markets represent ownership of productive assets, such as factories, intellectual property, brands, human capital, all of which have tended to grow in value over time.

The fundamentals of investment remain the same: invest for the long term, seek diversification, manage risk and do not be too worried by short-term noise. In our view, active management can provide a way to more dynamically identifying risks and opportunities, as opposed to passive investing, which can become overweighted to parts of the markets that have worked well in recent years but which may have become overvalued. Value is another fundamental principle of investment.

The lesson of the past century is not that markets avoid crises, but that they endure them. Investors who waited for certainty rarely found it. Investors who stayed invested found that patience is a virtue.

Important information

This marketing document is intended for investment professionals and is not for the use or benefit of other persons. This document is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. 

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