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Perspective: Are Things Today as Bad as They Seem?

 

Our nation is going through a challenging time, but we’ve overcome past periods of economic and cultural turmoil.

Financial professionals: This article is based off of our popular The Times They Are a-Changin’ module. Click here to access additional content to share.



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 due to political polarization, social upheaval, a global pandemic, trade wars, and a revolution in technology. But are the issues we’re facing today really that unprecedented? 

 

What we’ll cover:

  • Challenges of the past that still resonate today
  • How markets have fared through previous periods of economic, social, and political upheavals
  • Reasons why investors should remain hopeful

 

Sometimes, the best way to see where we are today is to step back and reflect on where we’ve been. In many ways, it feels as if we’re experiencing an insurmountable number of challenges as a country. Only 14% of the country is satisfied with how things are going right now; for comparison’s sake, the lowest the scale has gone was 7% during the Global Financial Crisis.1

14percent-unsatisfied

Source: Gallup Survey taken 8/31/20-9/13/20.

 

But 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 in many ways echo the strife from prior decades.

For example, today we’re seeing renewed calls for social justice. Americans are taking to the streets to protest police brutality and racial inequality—not unlike the turbulent Civil Rights movement of the 1960s

In the 1980s, people around the world were frightened by a new, rapidly spreading virus whose impact and transmission we didn’t fully understand: HIV/AIDS. In 2009 and 2010, more than 60 million Americans were infected by the H1N1 pandemic (aka swine flu). Today, we’re fighting the spread of the novel SARS-CoV-2 virus that has sickened millions with COVID-19.

In early 2020, we impeached our president. But that’s not the first time there’s been political scandal for a sitting president. Richard Nixon and Bill Clinton both made headlines, decades apart, for indecent behavior while holding the highest office in the nation.

 

But People—and Markets—Are Resilient

The social 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 as people, and, over time, so have our economy and our financial markets.

Most telling of all? During the last six decades, only one—the 2000s, in the wake of the Global Financial Crisis—generated negative stock returns for the entire decade. So despite all manner of challenges, stocks have continued to move onward and upward, as has our nation as a whole.

 

Stocks and Bonds Generated Positive Returns in All But One Decade Since 1960

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

Past performance is no guarantee of future results. Source: Morningstar, 7/20.  Please see stock and bond representative indices below. 

 

Prepare for Difficult Times

When challenging times strike, gaining perspective is critical. A trusted financial professional can help guide you through our present difficulties and help you prepare for tomorrow’s uncertainty—whatever form it may take. 

 

Next Steps:

  1. Download and review The Times They Are A-Changin’ brochure 
  2. Reach out to your financial professional for a portfolio review 
  3. Share this article via email, Facebook, LinkedIn, or Twitter

 

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1Gallup Survey taken 8/10/08-8/12/08

Stocks are represented by the S&P 500 Index, which is a market capitalization-weighted price index composed of 500 widely held common stocks, using data calculated by Ibbotson Associates. 

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. 

Investors cannot directly invest in an index. 

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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