Does it feel a bit like things are out of control? Just when you think the political climate can’t get any worse, when the presidential race is at full bellow, a Supreme Court Justice dies and the partisans go into overdrive. All this is amid riots going on in big and mid-size cities all over the country, which is happening in the middle of a hundred-year pandemic that has so many grandparents afraid to hug their grandchildren.
No wonder many of us are getting a feeling of doom. The Democrats say that the Republicans are terrible people, and the Republicans return the favor. News reporters tell us the demonstrations going on in their city is “mostly peaceful,” expecting you to believe them, while the fires behind them burn out of control. Then amid these man-made disasters you have the natural disaster of the fires in the Western United States. And there’s not one single major issue that has a solution both parties can agree on.
So, as we sit in our living rooms trying to digest the news, we feel sort of at a loss for what to do. Then we think of our invested assets, the money we have put away to hopefully help us avoid poverty in retirement, and we wonder what should we do? We think we should do something because of all the uncertainty, but what?
Many financial salespeople will tell you to bail out of the stock market for the safety of an insurance company-backed annuity. While annuities have their place, I don’t believe they should be considered just because one currently fears the stock market. And many of those guys are really good at selling fear.
However, consider this; In 1973 the Watergate scandal was bubbling up, ending with the resignation of President Richard Nixon in 1974. During that time the Dow Jones lost 45 percent of its value. The market came back, and reached new highs. On October 19th, 1987, the Stock market had its worst one-day decline in history, a loss of 22 percent. The market came back, and reached new highs. In 1990, the Dow sank from 2912 to 2382 (18 percent) in three months, scaring investors already spooked by 1987. The market came back, and reached new highs. Over a thirty-month period from 2000-2002, the S&P 500 sank more than 37 percent, running many investors out of the stock market. The market came back, and reached new highs. In 2008-2009 the Dow lost an amazing 57 percent over a seventeen-month period. The market came back, and reached new highs. Earlier this year the S&P fell by over 30 percent. The market has already come back.
While it would be fool-hearty not to have a concern about the direction the country will take in the coming years, history tells us that it’s a pretty safe wager to bet on the ingenuity of the American entrepreneur, and to have ownership in some of the greatest companies in the world. That’s what the stock market is, and that’s why the long-term investor is rarely disappointed.