In 2022, the falling stock and bond markets felt like a real-life horror show.
Portfolios got sliced.
Inflation poured Tabasco sauce over open wounds.
The war in Ukraine continued to shake the world, and fuel prices spiked to nosebleed levels.
These are unprecedented times.
You wander off to bed thinking about the markets.
You wish today were like it was 50 years ago.
You sometimes hear about the “good old days,” when life was simpler, predictable, and a lot more stable.
You grab your phone (why do you sleep with that thing?) and check historical market returns, starting 50 years ago.
From 1973-2003, US stocks averaged 10.5 percent.
“Normal,” you whisper.
“Back then, times were normal.”
Frustrated, you say out loud, “Today’s inflation, market drops and political instability are complete goon shows. It would be crazy to invest my money.”
You drop off to sleep.
But at midnight, you feel tugging at your feet.
Is that old Uncle Harry?
He has been dead for 20 years, but there he hovers with a beer.
He tilts his head.
He raises his bushy eyebrows.
And in a gruff voice he asks, “You would have preferred the good old days, 50 years ago, when inflation, the markets, the economy and politics were more stable and predictable?”
“I would,” you reply.
Suddenly, a rolled up newspaper appears in Harry’s gnarled hand.
He pulls it back and then smacks you in the head.
“In 1973, UK inflation hit 10.58 percent. In 1974, it hit 19.14 percent. In 1975, the United Kingdom might as well have been Argentina. Inflation hit 24.89 percent. If you think wages kept up, I’ll hit you hard again. The calendar years from 1976 to 1980 saw inflation rise 15.07 percent, 12.4 percent, 8.39 percent, 17.24 percent and 15.12 percent. Most of the world’s countries faced run-away inflation.”
Your head is sore and your pride is, well, a little wounded.
In defense, you mention the 18 percent stock market decline in 2022.
To your relief, Harry disappears.
Just as he does, your long deceased Aunt Doris shows up.
And she’s carrying a wooden spoon.
Sweetly, she says,
“Global and US stock markets fell about 50 percent from 1973-1974.”
Then she swats you with that spoon.
Frightened, but wanting to retain a bit of pride, you counter.
“Leftist political groups now threaten stability and economic profits.”
Just then, your great grandpa Willie shows up.
And he doesn’t look happy.
Like the ghost of Christmas past, he projects an animated global map of communism.
It spread like blood almost every decade from 1917.
It reached a peak in the early 1980s, before rapidly receding.
He kicks you once with his boot and then disappears.
Then bold Uncle Joe, who died wrestling a tiger, floats across your feet.
“I suppose now you’re going to whine about fuel price increases and war-caused energy shortages?”
He taps your knees with his cricket bat.
“There was an oil embargo in 1973,” he says. “Americans sometimes had to wait several days to fuel their cars. Oil prices peaked in 1980 when the USSR invaded Afghanistan. Sound familiar? Oil in 1980 was 76 percent more expensive than it was on February 10, 2023, when adjusted for inflation.”
Uncle Joe hasn’t hit you, so it might be safe to ask a question:
“What about rising home mortgage interest rates? This is a crazy time. Rates peaked at about 6.5 percent in 2022.”
The old guy, it seems, had no answer to that question.
Just then, an ancient woman (another sadistic relative, no doubt) floats above your bed…and stuffs your mouth with a bar of soap.
“In the early 1980s, I had a mortgage that charged 18 percent interest!”
Suddenly feeling brave, you spit out the soap and yell, “What about the sinking British pound?”
As fast as lightning, she stuffs that soap back in.
“In 1985, the British pound slumped to $1.08 USD. That’s much lower than it is today,” she says.
The 12-year period from 1973-1985 was an unprecedented time.
But over the 30 years from 1973-2003, US stocks averaged 10.5 percent.
British stocks weren’t that far behind.
In truth, there has never been a consistently, precedented time.
Every couple of years, something (sometimes several things) happened that never occurred before.
And sometimes, those events were horrific: The Great Depression; World War I; World War II; The Cold War and the 1962 Cuban Missile Crisis; the wars in Korea and Vietnam; the Balkan Wars; the Financial Crisis of 2008 and ongoing fights in the Middle East.
However, during every rolling historical 30-year period, stocks earned great returns.
They didn’t do so every year.
But single year returns are nothing but distractions from a long-term plan.
Unprecedented times are normal.
They will always be normal.
So should you be investing?
You never know who might decide to show up if you don’t.
Andrew Hallam is the best-selling author of Millionaire Expat (3rd edition), Balance, and Millionaire Teacher.