_{Originally published 09/23/2022}

The longer an investor’s portfolio is beneath an all-time high, the more doubts start to creep into their mind. The common words of wisdom begin to grow old such as “stay the course”, “buy low”, or “it always recovers”. Patience is tested. One may begin to wonder if things will ever recover, or if they will live long enough to see the recovery.

They may even go down the dangerous thought process of believing “this time it’s different”. Every market downturn is indeed different. Things will continue to happen that have never happened before, but will it be different from the aspect of the recovery? I highly doubt it.

There is no greater place to look for optimism than the incredible resiliency markets have shown throughout history. Let me share a story with you in that regard.

The 20th Century Market

The Dow Jones Index closed 1932 at 60, yes that is six-zero, not a typo. At the end of the century in 1999 it closed at 11,497. While it is hard to fathom, a market participant who earned the market returns would have earned a 191 fold return on their money (or 8.16% annualized). Every dollar invested in 1933 would be worth $191 in 1999. As shocking as that might appear, it is significantly understating the returns since dividends are not included.

While it is hard to get the exact data on the dividends for the Dow Jones Index, I was able to find data in the DFA Returns program on the US Stock Market (as measured by the CRSP 1 – 10 index). Reinvesting dividends along the way brings the total return from 8.16% up to 12.96% annualized. $1 invested at the start of 1933 morphs into $3,507 at the end of 1999.

What happened during the 67 year period from 1933 – 1999? Was it all rainbows and lollipops? Hardly. Here are some of the key moments from that time period that the market persisted through:

• The Great Depression lasted until 1939. From 1929 – 1932, it is estimated that worldwide GDP fell by 15%. By comparison, worldwide GDP fell less than 1% during the 2008 – 2009 Great Recession. Unemployment in the US rose to 23%.
• The Great Depression was followed up by World War 2. It is estimated nearly 50 million people died globally during the War, which would be the equivalent of nearly 160 million dying today. Nearly 300,000 Americans perished, the equivalent of 830,000 today.
• The Korean War began in 1950, over 33,000 American soldiers perished and over 80,000 were missing in action.
• For most of the period, the US and Soviet Union were engaged in the Cold War.
• In 1962, the US and Soviet Union were on the brink of a nuclear war during the Cuban Missile Crisis.
• In 1963, President John F. Kennedy was assassinated.
• In 1965, the US military was deployed to engage in the Vietnam War. Over 58,000 Americans were killed during the War.
• In 1968, Civil Rights leader Martin Luther King Jr. was assassinated.
• In 1971, President Richard Nixon removed the US off the gold standard of the Bretton Woods system.
• In 1973, the US experienced an oil crisis after OPEC announced they would no longer ship to the United States and other OPEC nations raised prices 400%.
• In 1974, President Richard Nixon resigned.
• The US Inflation rate was 8.2% annually from 1972 – 1982, causing the dollar to lose 60%+ of its value.
• The US Government Debt went from $22 billion in 1933 to $5.6 trillion in 1999.
• In 1989, the US invaded Panama.
• In 1990, the US spearheads the Gulf War.

Despite all of those scary things…

*Source DFA Returns Web (CRSP 1 – 10 Index).

Sure maybe I am cherry picking a bit, by using the market low at the start of 1933 or by ending at the peak of a bubble in 1999. I’ll go back and use the market peak at the end of 1928…

While the ending dollar value is much different, the overall return is still eye popping. Scary times are to be expected. A calm sea never made a skilled sailor.