Market volatility fuels higher long-term returns: HLB Mann Judd

Binaya Dahal

Journalist

1 May 2026

Market volatility can unsettle investors, but long-term historical trends show equities continue to reward those focused on fundamentals, according to HLB Mann Judd’s wealth management partner Lindzi Caputo.

She said investors should treat volatility as a normal and expected part of investing, defined by sharp price swings that are not only unavoidable but also the source of long-term return potential.

“Market volatility is simply part of the investing journey. It’s the risk that creates the opportunity for higher long-term returns. If we removed volatility, we’d also remove the potential for higher returns,” she said.

Caputo added that historically, when markets have dropped by 25% or more, they’ve typically rebounded with impressive gains – often growing strongly in the following year, and even more so over the next five and ten years.

“Take the S&P 500 Index as an example. During the global financial crisis, the index dropped by 57%. Yet, just one year after hitting its lowest point, it bounced back by 69%,” Caputo said.

“Five years on, it was up 178%, and after a decade, it had climbed an impressive 306%. The COVID-19 pandemic saw a similar story: a 34% fall, followed by a 78% surge in the next year, and a 174% gain over five years.”

She also pointed to the Australian shares which have delivered an average return of 13% per year since 1900. “In that time, 81% of years have been positive, with negative years only occurring about once every five years.”

Caputo further warned investors that they risk doing more harm than good if they react emotionally during such periods.

“It is important to remember that investment losses are only realised when assets are sold during these negative periods. While seeing your investments dip is never comfortable, these periods are temporary,” she said.

On short-term declines, Caputo said they are common as markets experience daily drops of more than 1% most years. “In fact, 1959 stands out as the only year where investors didn’t see a single daily fall of that size.”