These are not times for the faint of heart. Almost every day we have been battered with news of geopolitical challenges, tariffs, Federal government partial shut-downs, Brexits, Federal Reserve policy changes, polar vortexes… all amidst new all-time highs for stocks accompanied by the worst December for the S&P since 1931.
The presence of these events may lead many a long-time investor to worry and ask herself or himself if there are more “bad things out there” than ever? The answer, based on looking back at a variety of fairly dire events in history including recessions, market crashes, currency crises, the 9/11 terrorist attacks, the “Great Recession,” and recent interest rate increases, is that economies experience (and overcome) bad things OFTEN.
This fact can help to put current events in perspective. Compare our present worries with past crises shown in the accompanying chart.* In this graphic are shown several of the most challenging events from the past 50 years – and their effects on the growth of a dollar invested in global stock markets.
Part of the underlying message to the chart is that news and financial commentary can influence people’s view of investing – to the detriment of success. Friends, family or neighbors may talk about “insights” that promise a fast, easy return. However, growing wealth has no shortcuts. Success requires a solid investment approach, a long-term perspective, and discipline to stay the course.
I am not saying it is easy, but with proper perspective and a thoughtful, well-advised asset allocation worry can be greatly minimized.
*Source: Dimensional Fund Advisors LP. The MSCI World Index is a broad global index that represents large and mid-cap equity performance across 23 developed markets countries.