Financial Planning Fridays #138: 150 Years of Crises
Market volatility driven by new tariff policies has renewed concerns about a downturn. This video references 150 years of S&P 500 history, including 19 major declines, to show how selling during past crises would have interrupted long-term growth, and explains why Presilium continues to rebalance through the current uncertainty.
Market volatility driven by new tariff policies has renewed concerns about a downturn. This video references 150 years of S&P 500 history, including 19 major declines, to show how selling during past crises would have interrupted long-term growth, and explains why Presilium continues to rebalance through the current uncertainty.
Key takeaways
- A 150-year chart of the S&P 500 shows 19 major historical declines, each triggered by a different crisis at the time.
- Selling investments during any of those past crises would have interrupted long-term compounding and reduced long-term wealth, based on this historical data.
- New tariff policies are cited as a contributing factor to the market volatility seen in early 2025.
- Maintaining target allocations and rebalancing through temporary crises is described as the intended approach, though past performance does not guarantee future results.
Hi friends, we are now seeing the severe market volatility that we anticipated in our market outlook video for 2025. We didn't know what would cause it, and neither did anyone else, but it turns out we owe a lot of it to our new tariff policies and the effect they may have on the U.S. and global economies. We will treat this new temporary crisis just like every other one. We will buy more stock at the lower prices and maintain the target investment allocation that is part of our clients' beautiful long-term financial plans. This time is not different.
This wonderful chart from Morningstar shows the growth of a $1 investment over the past 150 years, adjusted for inflation, along with the 19 largest U.S. stock market declines during that time. Each of them was caused by a serious crisis, and at the time was a brand new reason to panic and sell your long-term investments. As you can see from this chart, this would have been a devastating mistake. A sale during any one of these crises would have interrupted the growth of your investments and permanently reduced your family's long-term wealth. An investment over this time is now worth 30,000 times as much.
Looking at this chart, the only logical thing to do was to hold your investments, and if you had the available resources, add to them during any and all of these temporary sales along the way. I don't know if we will one day add this latest temporary crisis to the list, or if it will be one of the hundreds of other tiny declines the market has experienced. I do know that this time should not be treated any differently than previous market events, and at Presilium we will be happily rebalancing to maintain our clients' target investment allocations. Thank you, and I look forward to talking with you next Friday.
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