Down years don't last.
Twenty four emerging markets, fifteen years, 160 negative country years. Here is every losing streak any of them had, and what happened next.
The question worth answering is not whether a market recovers. It is how long you have to sit still while it does.
Five findings from 360 country years.
Twenty four emerging markets, 2011 to 2025. Of those 360 country years, 160 were negative. They group into 115 separate unbroken losing runs.
Losing runs are short
Eighty five of the 115 runs lasted a single year. Eleven lasted three. Only two ever reached four, and none reached five.
The wait is usually brief
Of the 156 negative years whose outcome we can see, 71.8 per cent were positive the very next year and 90.4 per cent within two.
The recovery year is large
Across 112 recovery years the median was 19.6 per cent. Nearly half cleared 20 per cent and more than a quarter cleared 30.
Patience was not punished
Runs of two years or more were followed by 22.2 per cent on average, against 24.8 per cent after a single down year. Waiting longer cost almost nothing.
The markets never moved as one
In every year of the sample, some markets were down while others were up. There was never a year with nothing to rebalance out of and nothing to rebalance into.
The recovery is not something an investor has to forecast. It is something they have to be positioned for.
If a market just had a bad year, what happens next?
Taking all 156 negative country years where we can see what followed, and asking how long the investor had to wait for a positive year.
Three quarters of losing streaks are over in a single year.
There were 115 separate losing streaks across the 24 markets. Not one of them ran longer than four years.
The first year back averaged 24.1 per cent.
Across 112 recovery years the median was 19.6 per cent. The weakest was Brazil in 2012 at 0.3 per cent. The strongest was South Korea in 2025 at 100.8 per cent.
A longer wait did not mean a smaller reward. Streaks of one year were followed by an average of 24.8 per cent. Streaks of two or more years were followed by an average of 22.2 per cent.
In all fifteen years, some markets were down while others were up.
Red shows how many of the 24 markets were negative that year. Green shows how many were positive. You never had to guess which market was about to turn. You only had to hold all of them and keep the weights where you set them.
2015 was the worst year in the sample: 23 of 24 markets fell. In 2016, fifteen of them posted their first year back, averaging 19.5 per cent. Rebalancing is what moves money from the ones that already ran into the ones that are about to.
What if you put the money into the markets that just fell?
Set a starting balance, choose a rule, and the model applies it every year from 2011 to 2025. Each 31 December it ranks the markets on the year just finished, moves the whole balance into whichever ones the rule selects, and holds them for the next twelve months. The pale line is always the same benchmark: equal weight across all 24 markets, rebalanced annually.
| Year | Held for that year | Balance at 31 December |
|---|
Concentrating a balance into a handful of single country markets is an extreme position, shown here to test an idea against history rather than to suggest anyone should hold it. The model assumes rebalancing is free and instant, ignores fees, spreads, brokerage, tax and currency conversion to Australian dollars, and assumes every market was accessible to an Australian investor in every year, which several were not.
What this shows, and what it does not.
Source. Annual total returns for the 24 single country MSCI emerging market indices, 2011 to 2025, in United States dollars with distributions reinvested, as published in Novel Investor's emerging markets returns table. Cross checked against Total Money Management's own compilation: 340 of 345 overlapping year signs agreed, and 99 of 104 recorded recovery figures matched within 1.5 percentage points. Verify against your own data licence before relying on any figure.
One claim we are not making. Saying that every losing streak was followed by a positive year is true but circular, because a streak is defined as ending when a positive year arrives. The findings that carry real information are the ones above: how long streaks actually last, and how large the recovery year was.
What is not measured. These are calendar year index returns before fees, taxes and currency conversion to Australian dollars, and they assume every market was investable by an Australian at the time, which several were not. Three markets were still in a down run at the end of 2025, so their outcome is not yet known. Fifteen years is a short sample. Past returns are not a guide to future returns.
This is the evidence behind the Well 2 approach: hold the full spread of markets, set the weights deliberately, and rebalance on a schedule rather than on a hunch.
This newsletter is for informational purposes only and does not constitute financial advice. Total Money Management | AFSL 568642.
