Who can we blame?
How about this? “That damn Trump and his Trade War!”
Or this? “Those nattering nabobs of negativity on the left, like AOC!”
“Don’t they see they are causing market turmoil and hurting MY PORTFOLIO???”
So look at this will you?
This is one of my top 3 favorite investment graphs of all time. It shows the intra-year declines of the S&P 500 since 1980. Notice 2009, the market was down 14% at one point, yet finished up the year 26%. I remember that time well, it was the first quarter of 2009 right after Obama took office with his band of merry leftists.
People like me were sure, absolutely convinced, that capitalism was doomed. And for the first time ever, I abandoned my unfettered belief in the equity markets and went to bonds. No matter what hardcore capitalists, like Brian Wesbury, were saying, I simply could not overlook my political leanings and thus was convinced the Bolsheviks were ascending.
Thankfully, I quickly snapped out of it and went back to stocks in June or so of 2009. This proved to be profitable for me as I was able to capture much of the upside of….The Obama Years! Ironic isn’t it? If Obama was a Bolshevik, Lenin is spinning in his grave at the mere suggestion, given the capital markets took off during his two terms.
Let’s go back even further in time shall we?
In 1998 the market gained 27%. Yet during that year, August if memory serves, we had a 19% decline. The Mexico devaluation, Russia default, Long Term Capital Management implosion, I can’t remember which of those events occurred to doom the market, if not all simultaneously. But something happened. Something big! It was DOOMSDAY. I was at Vanguard at that time and the calls were coming in, panicked. And yet…
Did Helicopter Alan come save us in 1998 as supposedly Helicopter Ben did under Obama? No. In fact, regarding Helicopter Ben, it’s been a LONG time since he’s been around. At some point don’t the naysayers have to acknowledge the markets are back to doing what the markets do, advance over the long term by increasing earnings and dividends? (By the way, if you don’t know the reference to Helicopter Ben and Alan, you are better off for it!)
Look folks, you will not find a person more critical of Wall St. than me. I do not like the unholy alliance of Wall St. and Washington DC. You don’t need a PhD in history to see the problems that arise when Big Business, Big Government and Big Labor rub shoulders.
But, for what it’s worth, the beauty of the capital markets, and capitalism in its entirety, is there is always a competitor to take over when a company forgets to be nimble. That new entrant will exploit the laziness of the incumbent. The incumbent will then do one of three things; Change to recognize the threat, Fold or go begging the politicians to limit his competition. This happens regardless of a Democrat or Republican in office.
That kind of political maneuvering is always a concern. But by and large, we’ve been able to work around that affront to competition for decades. Jimmy Carter and Ted Kennedy, of ALL people, recognized the value of competition and opened up markets previously closed off. So, those who remained steadfast in their belief in the capital markets have been rewarded like no other investment since the dawn of mankind.
The lesson here? Forget the political shenanigans of the day. It will forever be with us. Be faithful in America. If we can survive your political bogeyman, Reagan or Carter, Clinton or Bush, Obama, and probably Trump, we’re going to be just fine.