Headlines of our past and the impact on the market

The headlines of today speak of recession, market corrections, deficits, as well as many other major issues and concerns. Those with investments in the market, and that should include most of us, may be more inclined to worry about the direction and the financial impact than others. Is all of the worry justified?

During the 1930s, these were some of the headlines: The Great Depression, a foreign conflict occurred with the Civil War in Spain, U.S. struggling economy including a recession, the talk of war and the breakout of war in Europe. While this decade has not produced another Great Depression, the start of 2000 may have felt like it to many. The other 1930 headlines of foreign conflicts, struggling economy and recession, could easily be recent headlines. Per Standard and Poor’s Stock Composite Index®, the growth of a thousand dollar investment was worth more than a $1,218 for Growth, Moderate Growth, Conservative Growth, and Income investors. Only the most aggressive investors lost money for the decade, and their thousand dollar investment was worth $995 at the end of the decade.

You might wonder if the 1940s were any better. During this time, France falls into foreign control, attack occurs at Pearl Harbor, wartime price controls were put into place, industry production shifts to wartime goods, consumer goods incur shortages, the prediction of a post-war recession, Dow sets new record - market “too high,” the start of the “Cold War,” Berlin blockade and the Soviets explode an A-bomb! I am not sure if I would want to invest during times like these! But according to Standard and Poor’s again, this time investors in all risk groups, aggressive growth, growth, moderate growth, conservative growth, and income investors all made money. A thousand dollar investment grew to a minimum of $1,485 to a maximum of $2,404.

The 1950s could be the same song, second verse. Headlines included the Korean War, excess profits tax, U.S. seizes steel mills, Soviets explode an H-bomb, the Dow climbs to 300 - with claims of being “too high,” President Eisenhower becomes ill, Suez crisis, the Soviets lead in the race to space with the Sputnik launch, recession, and Castro seizes power in Cuba -- any of which could lead investors to the side lines. But, a thousand dollar investment still proved to do well in markets. This time the most conservative investors, those targeting income grew to $1,497, with the most aggressive growing to $5,867.

The post baby boom era, 1960s, was not void of crisis either. Headlines like these were seen in the U.S., Soviets down U-2 spy plane, Berlin Wall erected, Cuban missile crisis, President Kennedy was assassinated, Gulf of Tonkin, Civil rights marches, Vietnam War escalates, Newark riots, USS Pueblo seized, money tightens and the markets fall. Still, those investors staying in the markets and riding through the issues saw profits. Once again, the minimum growth was to $1,390, and the maximum growth reached $2,122.

Headlines continue in the 1970s highlighting such events as Cambodia invaded and the war spreads, wage-price freeze, Watergate, oil embargo, President Nixon resigns, U.S. withdrawal from Vietnam, New York City threatens bankruptcy, energy crisis, massacres in Cambodia, and Three Mile Island nuclear disaster. Many economists refer to this period for its poor performance. Yet, the thousand dollar investment grew to $1,768 and a maximum of $1,812.

Those delivering the news and headlines did not lack for content during the 1980s. Such headlines like Abscam scandal rocks Congress, President Reagan and the pope were shot, worst recession in 40 years, Korean airliner shot down by Soviets, Iran/Iraq war escalates, U.S. become a debtor nation, bombing of Libya, record-setting market decline, bank failures peak, and junk bond debacle were seen across the country. Guess what? The thousand dollar investment grew to $3,465 and a high of $5,037.

And the 1990s, although they may seem ages ago, had their share of national and international events. Stories such as Iraq invades Kuwait, recession in the U.S., the Soviet Union dissolves, Los Angeles riots, Midwestern U.S. floods, Federal Reserve raises interest rates six times, Dow tops 4,000, then 5,000 - market “too high,” technology stocks tumble, chaos in Asian markets, global economic turmoil, fears of Y2K computer problems. Investments in U.S. equities continue to perform well, with the minimum growth to $2,595 and the best performing area reaches $5,324.

Headlines about global and economic disasters are not new. They have been around since we could write! Investors who panic are most likely to realize significant losses and will have the lowest performing accounts. Managing through periods of opportunities will, in the long turn, deliver results. Almost anyone can make money when things are hot, but hanging onto to it during difficult times may require a professional.


Would you like a response to a financial question? Send your question to Doug Horn, 115 W. Broadway, Maryville, TN 37801. Be sure to mark your envelope Money Matters.

Doug Horn, CFP, is an area financial planner with more than 24 years financial experience and founder of Quality Financial Concepts, located in downtown Maryville on Broadway.

Doug Horn, CFP, Registered Investment Advisor in Tennessee and Texas and Registered Principal, Branch Office of and Securities offered through CUE Financial, Member FINRA, SIPC.

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