It's Never as Bad as You Think (when you think it's bad) as published in InsideNova.com
In my 30+ years in the financial industry, I’ve spoken with countless investors who, countless times over, were convinced that the stock market was about to crash. Every so often, they’ve been correct, at least temporarily.
But I’ve also noticed that the markets have always eventually recovered and continued their long-term ascent. For example, in the early days of Jimmy Carter’s presidency, the S&P 500 Index was at about 100. Today, after 40 years, continuous global unrest, hyperinflation, banking crises, 9/11, Bernie Madoff and many other upsets come and gone … it’s hovering around 2,400.
What good is it to try to predict or react to the next big tumble? Historical evidence strongly suggests your best course is to stay the course instead.
- For the first time this century, all major world economies are growing.
- U.S. unemployment fell from 9.9% in April 2010 to 4.4% today.
- American household net worth has surged to $95 trillion from $68 trillion pre-2007 recession.
- Corporate cash is at 30%, double the pre-2000 recession level.
- S&P 500 corporate earnings are at a high-water mark.
- In just the last four years, U.S. stock dividend yields have increased 50%.
Speaking of U.S. presidents, investors often fret about the over-sized impact their new policies may have on the market. The current administration is certainly no exception to that wall of worry.
But whether we’re talking about presidents or paupers, here too, the market’s collective wisdom (i.e., all of us) seems to know more than any one of us. In his June 2017 Nick Murray Interactive advisor newsletter, Nick Murray refers to this as “the genius of the American economic system,” suggesting that “rational capital ultimately outlasts irrational presidencies.”
These strike me as sensible thoughts for now and future political and financial climates. Remember them next time you’re worried about the next market crash. If that’s not working, re-read them.