Broker Check

A Cause For Concern?

March 10, 2022
Share |

A Cause for Concern?

Yesterday, I was reading the Wall Street Journal and the seriousness of the world’s affairs struck me: skyrocketing inflation, record oil prices, and a Russian invasion of a neighboring country.  No wonder people are fearful.

Thing is, the WSJ issue was not from yesterday but from December 24, 1979.  Back then OPEC was deliberately raising the price of oil to hurt the U.S. (the U.S. was not yet a major producer of oil), inflation was at 13.3% (much higher than today’s 7%), and Russia had just invaded Afghanistan.  Things looked very bleak, and you couldn’t have blamed anyone if they wanted to sell all their investments, let alone want to invest more.

But if on that day, despite the turmoil in the world, you decided to invest $10,000 in the S&P 500 Index[1] you would have been rewarded handsomely over time. 

Over the next 15 years, the S&P 500 Index rose from 107.66 to 459.83.[2]  This was a 322% return, or approximately 10% average annual return.  Your $10,000 invested on the day Russia invaded Afghanistan would have been worth more than $32,000 15 years later.[3]

And let’s not forget the other crises that occurred over those 15 years:

  • Iran took US hostages
  • President Reagan was shot
  • The early 1980s recession
  • The Challenger Explosion
  • The Japanese asset price bubble
  • The 1987 stock market crash
  • The Savings and Loan crisis
  • The early 1990s recession

Despite these obstacles, the market marched on largely because of many other positive developments that occurred over those 15 years which garnered less attention, like the dramatic advances in science and technology and the mass release of personal computers.  I believe the current crisis we’re experiencing will be no different.

Mark Twain famously said, “History doesn’t repeat itself, but it often rhymes.” The events we’re experiencing now (high inflation, war, high fuel prices) are no doubt worrisome and particularly painful for many people.  But it’s critical to remember that they’re not new.  This time is NOT different and I believe this crisis will also pass just like the others.

As always, I’m here to help.  If you have any questions or wish to discuss this further, please don’t hesitate to contact me.

Regards,

Joe

 

[1] This is for illustration purposes only.  You cannot invest directly in an index.

[2] Source: https://dqydj.com/sp-500-return-calculator/

[3] Today the S&P 500 Index is over 4,000

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.  

Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Investing includes risks, including fluctuating prices and loss of principal.