It’s been said that we can count on death and taxes. We should also add “market crises” to the list.
It seems like the stock market is always either in a crisis, recovering from a crisis, or anticipating the next crisis. Indeed, we’ve experienced numerous “crises” over the past four decades including the following:
- In the 1970s, we had stagflation, oil shocks, high inflation, and a stock market that dropped 44% in 2 years.
- In the 1980s, we had the collapse of Drexel Burnham Lambert and the stock market crash of October 1987, which sent the Dow Jones Industrial Average down more than 20% in one day.
- In the 1990s, we had the savings and loan crisis, the bailout of hedge fund Long Term Capital Management, and the Asian financial crisis.
- In the 2000s, we had two bear markets, the subprime mortgage meltdown, and the financial crisis of 2008-2009.
But, guess what? Despite these market crises, the Dow Jones Industrial Average rose from 800 at the beginning of 1970 to 10,198 at the end of last week. That’s nearly a 13-fold increase.
It’s easy for investors to let the events of the day or the “crisis du jour” cloud their thinking.
However, successful investors take a wider view and realize that crises happen, crises get resolved, and while they can sometime be scary, they should not lead you to panic mode.
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