There has never been a time when the stock market didn't recover from a disaster. NEVER.
In my career, I have seen so many investors bail out of stocks for reasons that seemed so sensible at the time.
- The real estate recession and the Savings & Loan crisis of 1990.
- President Clinton is about to be impeached (he eventually was).
- Irrational exuberance speech by Federal Reserve Chairman Alan Greenspan.
- The demise of Long Term Capital Credit hedge fund.
- The emerging market crisis.
These were just the 1990's and are hardly remembered.
Since 2000, bear markets were a lot tougher and the causes were so much more painful.
- Tech Wreck of 2000
- 9/11 attack. In my little world, we all know people who lost their lives that day. I still can't believe it happened.
- The Great Recession 2007 to 2009.
- Global Pandemic - ongoing.
The major averages are at all-time highs. Yet, we should expect another calamity to crush stocks again. It's a problem if you are counting on your investments to help you pay for financial goals that are close at hand. That's why we lower our risk and reduce exposure to stocks as our time horizon to our goals shrinks. So, we can't depend solely on upward stock market performance to pay for our financial goals because its performance comes in fit and starts.
Throughout the 125 year period of the DJIA, innovative companies continued to be born. I remember when Google started to run in 2003, just when we needed a new hero to breath life into the NASDAQ. There are dozens of examples just like that that since my entry into the financial advice industry in 1990. It's the stock market's ability to regenerate itself that gives the DJIA and the other major averages their propensity to rise over time.
I love market history. So many lessons. I'm incredibly lucky that I'm still fascinated by it, especially since it's my life long career.
I really hope you'll take a look at this piece from The Wall Street Journal:
It's incredible! Make it you're number one read over the long weekend. Lots of charts and short explanations.
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Thanks and see you next week,
Mitch