Our Economic Sky Is Not Falling
The economy is tanking or so some people want you to believe.
The price of oil is the highest it has been…since 2014. The stock market is tumbling, and people are losing their retirement security. Products such as (you provide the name) are not available, and it is the government’s fault. It is all President (you provide that name too) fault. Inflation is devastating us.
All of what I just wrote is nonsense. The economy is not tanking. The recent spikes in oil prices are nothing compared to the fundamental shifts of energy prices in the 1970s. No 401-Ks and IRA’s will be worthless unless you sell out while the market is down.
Product unavailability, for the most part, is caused by factory closures in Asia. China and other Asian nations’ COVID policies have been misguided. They have not only not prevented spread but also are causing economic hardship mostly to themselves.
The U.S. has contributed to our supply chain shortages and most of the reasons are attributable to pre-COVID actions such as archaic transportation rules. Inflation while high will prove to be fleeting. How fleeting depends on the Ukrainian crisis and world wide Covid policies.
And lastly, no president manipulates the U.S. economy much in either direction. Policies made in Washington do have effects, but they take time to occur. The economy is too large for any one factor or person to have much of an impact.
In 1929 when the stock market crash happened, the year ended with the Dow at 248.48. The worst year of the Great Depression was 1932 and the market closed at 59.93. WWII began in 1939, and the market closed at 150.24 and in 1945, the year that war ended, the Dow was 192.91. It wasn’t until 1951 that the Dow exceeded its 1929 close at 269.23.
There were no 401-Ks or IRAs back then. Those lucky enough to have employer-based pensions weren’t worried about stock market returns. Our economy, and that of most of the world’s, was relatively simple as compared to now. Middle-income Americans had learned to stay away from playing the market after the crash. The buying and selling of stocks were for the rich.
Many things happened to, once again, have more Americans concerned about the markets. Guaranteed pensions are now available only to a lucky few. Managing our own money for retirement became more prevalent. The Dow, S&P, and NASDAQ were something that gave the best returns. Even with the ups and downs, they still do.
Investing in stocks, bonds, real estate, or anything else is a long-term proposition. Trying to time and predict markets is not possible for the individual investor. That is why depending on where you are in life, investing strategies and allocations need to change to reflect your circumstances.
Over the long-haul, markets have a resiliency that cannot be beat. They do go up and down yet over a lifetime you can have significant upside. Here is how the Dow closed the year at key points in my life:
· Born 280.90
· Entered high school 905.11
· Entered college 890.20
· Married 850.96
· 1st child born 805.01
· 2nd child born 963.99
· Divorced 3,136.60
· 2nd marriage 7,908.30
· Became full time FL resident 10,717.50
· Retired 36,338.30
· Friday, Feb 25, 2022 34,058.75
That is nearly a 70-year span. There have been many wars, recessions, presidential administrations, and technological changes. Yet one thing is constant…markets rise over time. According to the cost-of-living calculator on the American Institute for Economic Research website, a 1953 (the year I was born) dollar is worth $10.09 in 2021. Your return in the market over the same period is many times greater even calculating inflation.
The sky is not falling. Nor is America in danger of becoming a bankrupt. Historically speaking, we have never had it so good. Don’t let a few bad headlines lead you to believe differently.
In fact, I challenge all Americans to turn off Fox, MSNBC, CNN and all the rest. Watch an old western, read a novel, take a walk, or just speak to your spouse. I assure you that after a month, the U.S. will still be here, and your investments will be doing fine.