Every time we pick up the newspaper or turn on the news these days, we’re greeted with lurid headlines of doom and gloom. This fact itself is not news; it’s always been that way.
Right now, the media’s favorite economic bugaboos are tariffs, the trade war with China, signs of economic slowdown, and what the Fed is about to do with interest rates.
What I want you to know is this: It’s vitally important for you as an investor, and an American, to look beyond the headlines and daily news alerts and see the bigger, longer picture. We, as a nation, will survive and thrive — we always have. Times have been tough over the past several decades, and we’ve made it through the pain to progress.
If you focus on all the doom-and-gloom reports, you won’t survive as a long-term investor. Longitudinal investing isn’t for the faint of heart, but it works a hell of a lot better (financially and emotionally) than jumping in and out of the market based on the headlines.
Just remember my saying, “Time in the market beats timing the market.”
Let’s take a stroll through the story of the U.S. economy and stocks over the past five decades and see if my point still holds true.
U.S./global population: 205 million/3.7 billion
S&P 500 level/S&P 500 earnings: 90/$33
This was a tough year and a tough decade. There were nationwide riots over the Vietnam War, the U.S. invasion of Cambodia and the Kent State shootings.
Inflation was running at almost 6%. The average house cost about $23,000, and the average yearly income was $9,400. And the Beatles broke up.
Even with all of this, we saw significant growth in population and the stock market upon entering the next decade.
U.S./global population: 226 million/4.4 billion
S&P 500 level/S&P 500 earnings: 110/$44
In 1980, the United States’ relationship with Russia was arguably worse than it is today. It was so strained that we boycotted the 1980 Olympics in Moscow. Also this year, Mount St. Helens erupted in Washington state. In 1981, Ronald Reagan was nearly assassinated. And in September 1980, Iraqi leader Saddam Hussein invaded western Iran, sparking an almost-decadelong war during which over 1 million people were killed.
There was the Challenger disaster that killed all seven astronauts on board, which I remember from my fifth-grade classroom like it was yesterday. The AIDS epidemic in the U.S. exploded from 121 deaths in 1981 to 100,000 cases of the disease by 1989.
During this decade, housing costs nearly tripled from the previous 10 years. The price of a brand-new house hovered around $69,000, and interest rates rocketed to 21%. Stocks crashed almost 25% in a day on Oct. 19, 1987.
And yet, even with all of this, we still saw growth with population and the stock market by the end of this decade.
U.S./global population: 248 million/5.3 billion
S&P 500 level/S&P 500 earnings: 340/$41
This decade started with more trouble in the Middle East. Saddam Hussein moved into Kuwait, and the U.S. and the United Kingdom responded by sending more troops in Operation Desert Storm.
During the ’90s, we first had President George H.W. Bush in office, followed by President Bill Clinton (who would eventually face impeachment proceedings in 1998-99). The Asian financial crisis happened in 1997 when we saw countries like Thailand, Indonesia, the Philippines and South Korea watch their currencies fall between 30% and 80%, and their economic outputs plummet in similar fashion and numbers. Socially, there was fear and angst over Y2K.
Economically speaking, the U.S. entered a significant recession in 1990, losing almost 2 million jobs. Housing prices nearly doubled, up from $68,000 to $123,000. Inflation ran at over 5%.
As scary as all of this was, we still saw growth in population and the stock market by the end of this decade.
U.S./global population: 281 million/6.1 billion
S&P 500 level/S&P 500 earnings: 1,425/$73
There is no denying that the 2000s were a challenging decade. By March 2000, the Nasdaq was beginning to crash. Eventually, U.S. technology stocks cratered, with trillions of dollars lost. Accounting fraud scandals surfaced: Enron went bust (with estimated losses totaling $74 billion during bankruptcy proceedings), and WorldCom went down, too.
We all remember Sept. 11, 2001, when a series of four terrorist attacks were perpetrated against America. These attacks led to the war in Afghanistan. Later, there were the London subway bombings in 2005. Also that year, Hurricane Katrina struck New Orleans and killed nearly 2,000 people.
As if this weren’t enough for one decade, enter the global financial crisis and the United States’ subprime housing and real estate crisis. This economic disaster pulled America down into yet another massive recession and massive stock market correction that would last for years.
What else happened? The population still grew in the U.S. and around the globe. Even though the stock market’s level was lower in 2010, earnings for the S&P 500 were higher and stocks had already begun a comeback.
U.S./global population: 308 million/6.8 billion
S&P 500 level/S&P 500 earnings: 1,123/$90
In 2010, we started with President Barack Obama in office, and later, in 2017, President Donald Trump entered the scene. At the beginning of the decade, a 7.0 magnitude earthquake devastated Haiti, killing more than 230,000 and destroying the nation’s infrastructure. In May 2011, Navy SEALs raided a residence in Pakistan, killing the world’s most wanted terrorist — Osama bin Laden.
Also, at the start of this decade were the ashes of the global financial crisis that started in the late 2000s. But then came an active recovery — the Dow Jones Industrial Average experienced its longest stretch of gains since the tech boom of the late ’90s.
And so, we finally come to this year.
You already know these headlines: the Fed, China, Trump, Mueller, Twitter. Yet, here we are one half of a century later, and we’ve made mind-blowing progress.
We are flirting with all-time highs in the stock market, and that’s coming off the worst end of the year (December 2018) that we had seen since 1931. Fittingly, markets made their most recent bottom, or cascade, on Christmas Eve.
Where are we now?
U.S./global population: 327 million/7.5 billion
S&P 500 level/S&P 500 earnings: 2,950/$168*
From the 1970s to today, America’s population grew from 205 million to 327 million, while the global population increased from 3.7 billion to 7.5 billion. And the S&P 500 level ballooned from 90 to 2,950, with earnings following suit, going from $33 to nearly $170.
This, my friends, is the story of a half a century of progress, despite all of the pain in America and around the world. We are resilient in the face of adversity. It’s the American way.
* Estimated full year S&P 500 earnings for 2019
Wes Moss has been the host of “Money Matters” on News 95.5 and AM 750 WSB in Atlanta for more than seven years now, and he does a live show from 9-11 a.m. Sundays. He is the chief investment strategist for Atlanta-based Capital Investment Advisors. For more information, go to wesmoss.com.
This information is provided to you as a resource for informational purposes only and should not be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment adviser before making any investment/tax/estate/financial planning considerations or decisions.
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