Good morning & happy Monday!
“There will always be bull markets followed by bear markets followed by bull markets.”
– Sir John Templeton, 1912-2008, investor, founder of Templeton Growth Fund (Franklin Templeton Investments)
Well, my friends, Friday was a big day … a record setting day. Friday the S&P 500 closed above 5,000 for the first time ever.
The S&P 500 is basically the 500 largest publicly traded companies in the United States. Although it is not possible to invest directly into this index, this is generally considered the best gauge for how stocks are doing.
The Dow Jones (the Dow) only measures 30 stocks, but for some reason the media like to quote that index more frequently. Don’t get me started on the media!
Anyway, back to the S&P 500. Friday brought the record close of 5,026.61, and the first time the index has closed above 5,000 ever.
What I would like to do this morning is provide a little look back at how we got here:
It was April 1, 2021 that the S&P 500 first hit 4,000.
What has happened in the world in the 1,044 days since April fool’s day of 2021?
A disastrous U.S. withdraw from Afghanistan, a Russian invasion of Ukraine, Roe vs. Wade overturned by the Supreme Court, an FBI raid on Donald Trump’s home, a Chinese spy balloon flying over the United States, massive wildfires in Maui, Hawaii, the largest attack on the Jewish people since WW2 by Hamas on October 7, 2023, an increasing aggressive Iran, school shootings, hurricanes, former President Trump charged in 4 different legal cases and impeached for a second time, Joe Biden’s mental decline on display for the world to see, massive illegal immigration at the U.S. southern border, a dramatic rise in interest rates, a national debt of over $34 trillion, the Federal Reserve dramatically increasing the lending rates, and inflation we have not seen since the 1970s … just to name a few. 😉
It feels like the world is on fire, and yet, over these 1,044 days the S&P 500 went from 4,000 to 5,000.
It was most certainly not a straight line up from 4,000 to 5,000, but through the bumps and bruises the market powered through.
History teaches us that this is always how it works. As crazy as the world is, those of us who own companies through stock ownership will continue to seek growth and profitability despite the insanity all around us.
Higher interest rates, companies adjust. Changes in government regulations, companies adjust. Market conditions change, companies adjust. Consumer spending modifies, companies adjust.
When we own stocks, we own these profitable companies who are constantly adjusting to the changing world around them.
It was July 12, 2019 when the S&P 500 first hit 3,000.
What happened in the 629 days between S&P 500 value of 3,000 (7/12/2019) and the S&P 500 value of 4,000 (4/1/2021)?
Have you heard of this thing called COVID-19? What about a hotly contested presidential election, a storming of the capital, President Trump impeached (first time), record levels of government spending in response to COVID, massive protests, racial & social unrest, and a defund the police movement.
Well, it had to have been calm from when the S&P 500 went from 2,000 on August 26, 2014 to 3,000 on July 12, 2019, right?
Wrong. That nearly 5 years saw trade wars with China, the UK Brexit movement, a collapse in oil prices, a lifting of sanctions on Iran, an overhaul of the U.S. tax code, heck, in 2017 alone there were 1,099 global terrorist attacks that killed 7,455.
Are you seeing a trend here?
It was February 2, 1998 when the S&P 500 first hit 1,000. This was the year I graduated high school. Later that year I started my career in financial services. It took the S&P 500 from February 2, 1998 to August 26, 2014 to go from 1,000 to 2,000.
This season saw the 9/11 terrorist attacks, the collapse of the housing market, government bailouts, and the Great Recession of 2008.
Here’s the bottom line: despite never-ending challenges, the stock market is resilient because companies are resilient.
The day I was born (January 3, 1980) the value of the S&P 500 was 105.20.
My lifetime has brought the fall of the Berlin Wall, an assassination attempt of Ronald Regan, the collapse of the USRR, multiple presidential impeachments (Clinton & Trump), multiple wars (Gulf War, Afghanistan, & Iraq), 8 different presidents (4 Democrats & 4 Republicans), and mind-blowing advances in medicine and technology.
As much as I would like to convince myself otherwise, at 43 years old, I am solidly middle age. Now, if the S&P 500 has gone from 105.20 to 5,026.61 in my 43-year lifetime, what do you think it would be if the next 43 years are like that last 43 years?
This is obviously a silly exercise, but let’s just do some math for fun 😊. 5,026.61 (Friday’s S&P 500 close) is 47.73x more than 105.20 (the S&P value the day I was born) … so if we take the S&P 500 value of 5,026.61 and multiple it by 47.73 we could see the S&P 500 at 239,000 when I’m 86 years old. Who the heck knows if that is what it will be the case, but just thinking that through is incredible!
Do you see why I sound like a broken record when I say over and over and over again … STAY THE COURSE!
Please, please, please don’t let short-term stress cause you to lose your focus and go off course. The price of giving into emotions during times of stress can be incredibly detrimental.
I’m so proud of you for staying the course over these last few years. I know it has not been easy, but you are now being rewarded. It is such an honor for me to be alongside you on this journey. Thank you from the bottom of my heart!
Make it a great week ahead!