Is It Different This Time? Part 2

“There are no guarantees, but throughout our history investors have been rewarded for long-term investing in stocks, for staying the course through short-term noise, and for being prudently diversified.” – Joni Clark.

Today the S&P 500 fell almost 4%, after being down twice that amount.  The Fear Factor is here big time.  No one knows whether stocks will fall further or will move higher in the next few months.  I believe a long-term approach is the only strategy that works and that some historical perspective is needed now.

Note that the October 13th Time magazine continues a long tradition of scary headlines and covers.  Dramatic covers sell magazines. But the media do us no favors by trying to scare us into selling and encouraging us to wait on the sidelines until economic conditions look better.   There is evidence that it always looks bleak in the middle of a financial crisis.  However, in the past, selling at that time has been a big mistake.

This article comes via Charles L. Stanley’s blog.

Breaking News: It’s Not Different This Time by Joni Clark, Chief Investment Strategist of Loring Ward, is food for thought and provides some needed historical perspective. To underscore her position, Clark cleverly displays old Time magazine covers and briefly discusses the respective article context. With the benefit of 20/20 hindsight, she shows how we survived all of the previous crises.

Here is my favorite quote:

“In an age of economic anxiety, real and rising concerns about whether free enterprise can surmount the problems of inflation, energy and productivity. The relentless daily pounding of dismal news drives deeper the public’s conviction that the economy is in a profound and morose crisis.”

Does that sound familiar to you? Well, the quote is from Time magazine’s article Capitalism: Is It Working? The cover story for April 21, 1980.

The more things change, the more they stay the same.

In a supreme understatement, Clark says, “The headlines have not been good this year.”  Well, neither were they good in the past.

But, Clark observes:

“If you’d had the courage and conviction back in the early 70s to ignore Watergate, the oil crisis, Vietnam and inflation and invested $100,000 in the S&P 500…and then if you’d taken a long-term perspective and not worried too much about the S&L crisis, the 1987 “panic,” the tech bubble and all the other speed bumps along the way, you’d now have more than $3,800,000.”

Her conclusion is the one I quote at the top of this post. It is my strong belief, as well.