"History repeats itself, and that's one of the things that's wrong with history," Clarence Darrow
"It's like déjà vu all over again," Yogi Berra
It seems like the media is constantly telling us that we are in "unprecedented times". However, when we went through the Arab oil embargo in '73-'74, the stock market crash of 1987, the Dot.Com bubble, 9/11, and the Great Financial Crisis in '08-'09, the media told us the same thing.
Sir John Templeton famously said that the four most dangerous words that any investor can utter are 'This time is different". While he meant that valuations, earnings, interest rates, inflation and GDP ALWAYS matter, every crisis brings its own unique set of circumstances economically, politically...and in this case, medically and virally.
However, you can see from the chart below that we have always solved the problems that previously seemed insurmountable, and this led us to new highs in the economy, wealth creation, and quality of life.
Investors cannot directly invest in indices. Past performance does not guarantee future results
"It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so," Mark Twain
What do we know that is still true today that was true before the COVID-19 coronavirus outbreak? I can think of three truths that have often been espoused by Nick Murray, who I have read and followed for more than 20 years. I have often shared his thoughts and wisdom with you, probably none more important than the three emotional traits you need to be successful as a long-term investor and accumulator of wealth:
1) Discipline- During times when markets seem euphoric and valuations become unhinged from pricing, you need to stay disciplined with your diversification and asset allocation, and not chase the latest "hot dot" or theme.
2) Patience- There are many times where it seems like the market grinds slowly up and down for a number of quarters and it feels like you are getting nowhere. We saw this play out during the 2015-16 market cycle where the markets seemed to go nowhere for two years. Subsequently, the market doubled in value in the five years from 2015 to 2019.
3) Faith- during times of dislocation, volatility and downturn, you have to have faith that free markets, entrepreneurialism, innovation and technology will bring us back, just like they always have. (See the chart above)
Over the last two months, we have been through the initial downturn in the stock, bond, and oil markets, and government mandated shut down of our economy. During that time period, we tried to focus on controlling what you can control so that you did not make bad emotional decisions. We will now likely move into a longer-term period of uncertainty, as we try to restart the economy while maintaining social distancing and trying to solve the viral outbreak through treatment or future vaccines.
I wanted to bring you some historical perspective and optimism during this time. We know that the media/social media often stirs the pot and promotes the negative and uncertain. We will try to be the antidote to that as we continue to share truth and optimism with you as we "Move (Restart) Life Forward" together.
© 2020 Jesse Hurst