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While the lava lamps and folk music of the time aren’t in vogue anymore, Bob Dylan’s anthem, “The Times, They Are A-Changin’” seems just as fitting today as it was in the tumultuous 1960s when it was written. It may feel as if we’re living in uncharted waters now: sky-high inflation, political polarization, geopolitical tensions, …but are the issues we’re facing today really that unprecedented?

The truth is that we’ve overcome challenges and tumult before—both from an economic and cultural standpoint. In fact, the challenges we’re facing today are echoes of strife from prior decades.

For example, inflation was a standout feature of the late 1970s and early 1980s, but it moderated significantly in the decades following. This is why many Americans haven’t dealt with high inflation in their adult lives until now, when pent-up demand from the COVID-19 pandemic is meeting ongoing supply-chain disruptions and pushing inflation rapidly higher. Add in a military conflict in Europe between Ukraine and Russia, a huge supplier of global oil, and investors are feeling significant pain at the pump for the first time in many years.

In the 1980s, we were frightened by a new, rapidly spreading virus we didn’t fully understand: HIV/AIDS. Decades later, a novel treatment has successfully cured multiple HIV patients—just as we’re trying to determine what the world will look like as the COVID-19 pandemic becomes endemic, moving from the foreground to the background of our everyday lives.

 

But People—And Markets—Are Resilient

The challenges we’ve faced have taken place in the midst of market volatility, bear markets, bull markets, inflation, stagflation, energy crises, and heightened geopolitical tensions. In other words, we’ve been through the social and economic wringer before, yet we’ve persevered.

Most telling of all? During the last 6 decades, only one (the 2000s, in the wake of the Global Financial Crisis) generated negative stock returns for the entire decade; bonds generated positive performance in every decade.

 
 Average Annual Return (%)
  Decade   Bonds Stocks
1960s 1.68 7.81
1970s 6.23 5.87
1980s 13.02 17.55
1990s 8.36 18.21
2000s 7.65 -0.95
2010s 8.04 13.56

Past performance does not guarantee future results. Stocks are represented by the IA SBBI US Large Stock Index, which  tracks the monthly return of the S&P 500 Index, a market capitalization-weighted price index composed of 500 widely held common stocks. The historical data from 1929 to 1969 is calculated by Ibbotson. Bonds are represented by the IA SBBI US Long-Term Corporate Index, which measures the performance of US dollar-­denominated bonds issued in the US investment-grade bond market, including US and non-US corporate securities that have at least 10 years to maturity and a credit rating of AAA/AA. Indices are unmanaged and unavailable for direct investment. Source: Morningstar, 2/22. 

In Other Words

For clients who are concerned about the state of markets today, historical perspective such as this can help them feel more confident—and stay invested. A look back at history shows that despite all manner of challenges, financial markets have historically moved onward and upward, as has our nation as a whole.

 

 

Financial Professional Next Steps

 

1 This article is based on our popular The Times They Are A-Changin'  brochure. Click here to access additional content to share.

 

Important Risks: Investing involves risk, including the possible loss of principal. • Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall.

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