News You Can Use
The Only Thing We Have To Fear...
President Franklin Roosevelt uttered this famous statement in his inaugural address on March 4th, 1933. America was in the midst of the “great depression”. Businesses were shuttered. Unemployment was rampant. Migration within the United States emptied rural areas as people fled to big cities.
While this was happening in the U.S., Europe and the rest of the world were also in financial crisis. Many people were fearful, depressed, hungry and hopeless. Four straight years rocked by bad news had stomped the spirit of our nation. $100 invested in the S&P 500 on January 1,?1929 would have dropped to $35.23 on Dec. 31, 1932.
Enter FDR and his famous “smack down” of depression “groupthink”. Riding a national cyclical economic upswing, his government passed legislation to help the people, business and banking, helping jumpstart the moribund economy.
In the next 4 years, the stock market rebounded. That aforementioned $35.23 grew to $172.75 by the end of 1936. (According to the Federal Reserve database, a hypothetical $100 invested on Dec. 31st 1928 would have grown to $219,893 by the end of 2014.)
So, is there a lesson that might be applicable to today’s investor? Amid the constant reporting of every piece of bad news; market volatility, Washington infighting, world turmoil, would anyone wonder why so many investors are?frozen, insecure, or fearful of what might happen next?
My professors at Rutgers Grad School of business always stressed “you buy on bad news and you sell on good news”. Most investors do the opposite. We can all learn from history. Enlightened caution and an opportunistic attitude will drive better decision making.