We’ve had lowered market values since January of 2021; accounts have risen recently but may still be down about 10%. 2022 was bumpy and the S&P ended the year minus 18.13%. We patiently await the return of higher values.
Companies are made up of people and problems. The ability to recognize and balance solutions to problems separates great companies from mediocre companies.
The technology, “tech” companies, went through a heyday in the 1990’s, but the bubble collapsed in 2000 and some tech companies disappeared never to be heard from again. Then terrorists attacked our country on 9-11 (2001), followed by a “solution” of cheap interest rates which caused real estate values to spiral. We then learned about the subprime loans followed by the Great Recession of 2007-2009. When a change in accounting rules restarted a Bull Market in stocks on 3-9-2009, it lasted for many years. Covid then happened and the economy shut down and unexpected deaths occurred and now some banks have failed.
There is no shortage of things to worry about as the media reminds you daily. And yet we have worked through so many problems, created so many solutions, become the most profitable nation in the world, why worry?
The stock market/s have created huge wealth for the small or large investor who has been disciplined. We learn year after year when the average is given, that the stock market in equities has averaged 10.4% per year over all the years and there is nothing boring about compounding wealth at 10.4% for years. Understanding averages means there were few years when the return was an actual 10.4%, but many years of varying returns, (up 30%, down 20%, up 5% and etc.) creating an average of 10.4% per year.
Other reasons to be amazed by the stock market: between 1926 and 2022, rolling periods of 1 year returned positive returns 75.28% of the time; rolling periods of 3 years returned positive returns 84.41% of the time, rolling periods of 10 years returned positive returns 94.55% of the time and rolling periods of 20 years returned positive returns 100% of the time.*
The S&P 500 ended 2022 up 53 times greater than it ended 1961.
The cash dividend of the S&P 500 was 32 times greater in 2022 than 1961.
The Consumer Price Index was 10 times greater at the end of 2022 than it was in 1961* but participating in dividends and growth of capital allowed investors to beat the Consumer Price Index (inflation.) That’s right! Investors, not savers, kept up with increases in the cost of items.
This is historical information. For all the bumbling and bad decisions many of us think are made on our behalf, we made money in the stock market…if we chose carefully and “stayed put,” while bonds lost money “safely” according to a blog by Robert Carey, CFA, on 2/7/23. The U.S. Aggregate Bond Index earned 2.66% over 15 years ending December, 2022, while the CPI was 3.10% and the S&P 500 Index 8.79%.
I know many of us are concerned about the huge debt of the American government and the constant urge to increase the debt. Paul Singer, a successful hedge fund manager quoted in the Wall Street Journal on April 8-9, 2023, “Credit collapse, although terrible, is not as terrible as hyperinflation in terms of destruction wrought upon societies. Capitalism which is economic freedom, can survive a credit crisis, we don’t think it can survive hyperinflation.”
We are here; our telephone is answered quickly by a real person and we have real answers! Difficulties have always abounded but there have been answers that overcome. Please call and suggest your friends and relatives call!
Kim Rankin, Accountant
Richard Martin, Investment Advisor
Lynne Goldsmith, Investment Advisor
Dayton Hoffmann, UW-Madison Intern
*Information collected and provided by Nick Murray.