A Tale of Four Decades
Successful investing requires a long-term perspective. However, maintaining that long-term perspective can be hard when all we hear around us is noise and negativity. In addition, when it comes to the markets, there has definitely been a lot of noise and negativity lately!
The good news is that maintaining perspective is easier when history is our guide. For perspective and comfort, we wanted to take a moment to look back and share with you some of the milestone events over just the past four decades.
Global Population1: 4.1 billion
U.S. Population2: 216 million
U.S. Real GDP3: $5.49 trillion
S&P year-end close4: 90.19
Saigon falls; President Ford escapes two assassination attempts within seventeen days. Margaret Thatcher becomes the first woman leader of Britain’s Conservative Party. Andrei Sakharov, the great hero of the Soviet resistance, wins the Nobel Peace Prize. Saturday Night Live debuts on October 11. An American and a Soviet spacecraft link up in space; the event is memorialized on a beautiful ten-cent U.S. postage stamp.5
Global Population1: 4.85 billion
U.S. Population2: 238 million
U.S. Real GDP3: $7.71 trillion
S&P year-end close4: 211.28
Gorbachev comes to power in the Soviet Union, and meets with President Reagan. The Internet domain name system is created. Windows 1.0 is published, and the first successful human heart transplant takes place. The song of the year is “We Are the World.” In the greatest marketing catastrophe since the Edsel, the Coca-Cola Company introduces New Coke. A first class U.S. postage stamp costs twenty-two cents.5
Global Population1: 5.7 billion
U.S. Population2: 266 million
U.S. Real GDP3: $10.28 trillion
S&P year-end close4: 615.93
The Oklahoma City bombing is the greatest domestic terrorist atrocity in American history. O.J. Simpson’s murder trial begins, and ends ten months later in his acquittal. Israeli Prime Minister Yitzhak Rabin is assassinated. The Rock and Roll Hall of Fame and Museum opens in Cleveland. Jerry Garcia dies. A postage stamp costs thirty-two cents.5
Global Population1: 6.5 billion
U.S. Population2: 296 million
U.S. Real GDP3: 14.37 trillion
S&P year-end close4: 1,248.29
Hurricane Katrina devastates an American land mass larger than Great Britain. Saddam Hussein goes on trial for his life. July 7 becomes London’s 9/11, as coordinated attacks on the bus and subway system claim 52 lives. Pope John Paul II dies; he will be canonized only nine years later. A postage stamp costs thirty-seven cents.5
Global Population1: 7.29 billion
U.S. Population2: 322 million
U.S. Real GDP3: 16.42 trillion as of 9/30/2015
S&P year-end close4: 2,043.94
A radical Islamic faction, ISIS, casts the Middle East into chaos, and carries out terrorist atrocities in Paris and elsewhere. Refugees pour into Europe. The world’s leading nations reach an accord with Iran on its nuclear development program. Yogi Berra dies. 14 people are killed and 22 seriously injured in a terrorist attack in San Bernardino, California. A postage stamp costs forty-nine cents.5
In summary, over the past forty years, we have seen the global population increase by nearly 80%. During this time, extreme poverty has been reduced from one out of every two, to now one out of every ten. Here at home, the U.S. population saw an increase of 50%, and is gaining a new addition every 14 seconds6. Better yet, we as Americans have room to grow. Our population density is 85 people per square mile, compared to France’s 300, the UK’s 680, or Japan’s whopping 870. Over the past five years alone, we have experienced an energy renaissance, cultivated by new technologies and advancements in harvesting and exploring for natural resources.
But despite all the changes over the last 40 years, one thing has remained the same: the markets are constantly fluctuating. Some years provided market growth, while others provided market declines. We saw 7 declines in the market of 20% or more. But through all of the ups and the downs, the S&P 500® increased by a multiple of twenty from its ending value in 1975.
If there’s a lesson to be drawn from this—and we believe there is—it’s that maintaining perspective is one of the biggest keys to being a successful investor. To quote Nick Murray, one of the financial industry’s leading writers: “If you are working, saving and investing over years and decades toward the great goals of life—children’s education, a retirement characterized by dignity and independence, meaningful legacies—it has always been a great mistake to react to market volatility.”
So as a New Year begins (bringing a new period of volatility with it), always remember to keep a little perspective! Of course, if you ever have any questions or concerns about what’s going on in the markets, please don’t hesitate to give us a call at Minich MacGregor Wealth Management. We are always happy to speak with you.