By Eric Reich
This is the phrase that makes me cringe more than any other one. The reason is that investors truly believe it to be true, and I know that it absolutely is not. The phrase is a reflection that implies the belief of why the stock market is behaving the way it is, and the belief that, unlike the countless other times the stock market dropped, the reason that it happened this time is going to make it somehow a permanent decline.
Let’s back up to the beginning of the United States stock market in 1792 (the Dutch have had one since 1602) with the signing of the Buttonwood Agreement in front of 68 Wall Street, hence the name. That’s 233 years of track record to back up why I know that “this time” is certainly no different than any other normal market decline. Ironically, the first “crash” happened that year. It was followed by another in 1819, then 1837, 1857, 1884, 1893, 1896, 1901, 1907 (which ultimately resulted in the creation of the Federal Reserve), 1929 (which led to the Great Depression) where the stock market fell 90% before finally recovering in 1932, 1937, 1962 (Kennedy), 1973 (Oil Crisis), 1987 (Black Monday) which saw a 22.6% drop in a single day, 1989, 2000-2001 (Dot-Com Crash), 2008 (Financial Crisis), 2010 Flash crash, and 2020 Covid-19 crash. Today, we have elevated volatility, which has resulted in a mere -6% year-to-date decline as of this writing. Wow, that’s a lot of crashes! As you can see, they all happened for a number of very different reasons. I can imagine investors saying after each crash, “Yeah, but this time it’s different!”
Now after all of those crashes, and many notable declines I omitted, the stock market has still managed to return 8.6% net of inflation during all of that time. That translates to over 10% per year compounded growth before inflation. Over all of those years, there has never been any rolling 20-year time period where the market was negative, not once.
Today, we like to believe that this president or that president is the cause of all of our problems. The reality is that it is statistically irrelevant which party is in office as it relates to the stock market over the course of time. The markets are so much bigger than any politician, contrary to popular belief, and this one won’t be any different in time.
If you want to know how to “win” at investing, then invest as much as you can in low-cost, well-diversified investments, and turn off the news media that is biased toward one party or another. Believing that a political party matters as it relates to the stock market is a sucker bet. What matters is the amount you invest and the length of time you leave it there to grow. Stop trying to guess the market’s next move, because nobody can. The markets will ebb and flow, but ultimately, they have always won. Based on 233 years of data, they will continue to do so. And no, this time is not different.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
