Once again this year we wanted to take an updated look at all of the crises of the past 20-plus years. As you’ll see, at the time, each of them would have given us great reasons to not keep our clients invested in stock. Every single year had its own unique crises that looked, and felt, brand new to the world and came with their own new set of risks. Every single time we could have said that this time is different. This time we should recommend that clients sell their stock, avoid these risks from this new never before seen event, and perhaps reinvest after this crisis is solved. 

However, looking back, this always would have been a huge mistake. The returns over the past 23 years, and for the past 100 years for that matter, have come from remaining optimistic and believing in humanity’s ability to adjust and adapt, staying invested through each crisis, and rebalancing along the way. 

We prepared this chart to show you each annual crisis for the past 20+ years with the subsequent return of the S&P 500 up until this year.

The hard part wasn’t finding a crisis each year. The hard part was choosing which, from the wide variety of negative global, economic, and political events that occurred each year, to fit on to our chart. 

As you can see, we listed one or two of the crises for each year and the return of an investment in the S&P 500 from January 1st of that year until October 2023. As you can see, despite all the crises that have occurred over the past 20+ years, the market returns have been quite good. The returns range from 18% in the short-term up to more than 612% since 2003! 

This chart shows the total return instead had you decided to move your investments to 10 year treasury bonds to avoid taking the risk each crisis presented.

The range of returns dramatically decreased from negative 24% recently to a best case of 72%, since 2002. 

Finally, this chart shows you how much more a $1 Million investment account would be worth today if you had remained invested in the S&P 500 rather than moving to the 10-year treasury bond.

 

This is a stunning amount of money that could have been used to take additional vacations in retirement, paid for the college education of an entire family generation, or provided an enormous gift to your favorite charity.

This is why it is so important to stay invested no matter what the world gives us. Peter Lynch famously said that “Far more money has been lost by investors trying to anticipate market corrections than in corrections themselves.”

2023 already has its own new set of challenges- wars, the highest inflation rate in more than 30 years and the seemingly never-ending question of if we are entering a global recession. 

What will happen next with each of these? I have no idea and neither does anyone else. 

However, I am very confident that whatever happens, our clients will be ok because of their solid long-term financial plans and our ability to proactively take advantage of temporary market volatility. 

Thank you and we look forward to talking with you again soon! 

Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.