Is the S&P/ASX 200 Index (ASX: XJO) ok? It certainly doesn't look ok, if the past few trading days are anything to go by. It's hard to believe right now, but it was only on Monday of this week that the ASX's flagship index was literally at an all-time high.
Yep, Monday saw the ASX 200 clock 9,200.9 points, the first time in its long history that it had reached over 9,200 points. What a difference four trading days and a new war can make.
Over the rest of this trading week, the ASX 200 has endured two (soon to be three, if today's mood holds) of its worst days in months. Tuesday saw the index tank 1.3%, followed by a 1.9% drubbing on Wednesday. Yesterday's session saw the markets rebound slightly with a 0.44% recovery. But that has all gone out the window this Friday. At the time of writing, the ASX 200 has retreated by another 1.36%, leaving the index at just under 8,330 points. That's down by about 4.15% from where the markets finished up on Monday afternoon.
If today's drop holds, the ASX is heading for its worst week in years.
So not really ok, right?
Well, it can certainly be tough for ASX investors to digest a one-week fall that wipes off around half of the average annual return of the ASX 200.
The bad news is that this kind of fall will result in the vast majority of ASX investors taking a big haircut on the value of their portfolios.
The good news is that we've been here before, and so we know how the playbook goes.
Image source: Getty Images
Is the ASX 200 ok after one of its worst weeks in years?
Every year, our Chief Investment Officer, Scott Phillips, looks at the Vanguard Chart. This chart, which Scott calls "the single most powerful image in investing", is released annually in September and plots the performance of all of the major asset classes available in Australia over the past 30 years. Our coverage of last year's report is worth a read here.
The headline is that the ASX 200 compounded at an inflation-crushing rate of 9.3% per annum over the 30 years to 30 June 2025. That would have turned a $10,000 investment into $143,786 over that period. Shares beat the pants off 'safe' assets like cash and government bonds.
But what investors should really take away is that these gains occurred despite a litany of catastrophic black swan events. The 30 years to 30 June 2025 spanned the dot-com crash, the Asian financial crisis, 9/11, the invasions of Iraq and Afghanistan, the global financial crisis, the Eurozone crisis, and, of course, the COVID-19 pandemic. Yet the ASX 200 was at an all-time high on Monday.
The Australian markets have seen a lot of calamity in their time. Yet our best companions adapt and continue to prosper. I do not doubt that this will happen again, despite the tragedy and destruction of war. So while it doesn't look like the ASX 200 is remotely ok this week, I think that it will be, and investors should act accordingly.
