Death of equities, 40 years ago today

On August 13, 1979, Business Week wrote a cover-page story that summarized feelings that many people today may find familiar: “we hate equities.”

BusinessWeek

That day, the S&P 500 closed at 107.42 and today, forty years after equities passed away, the S&P 500 index is near 3,000. Since that time, S&P 500 dividend has risen from $6 to over $56. Over these past forty years, inflation has risen 3.5 times. (1)

If you’d done the opposite of what the financial news media told you to do, you would have done very well. If you’d invested, in spite of the numerous reasons why “this time it’s different” you’d have done very well. With a ruthless disregard for all reasons to be pessimistic, we remain optimistic today.

If, in 1979, in the deep pit of despair which was stagflation, lousy stock market returns, and looming threats of nearly inevitable nuclear war, you had the courage to put your money in equities, you’d have near 30 times the amount of money today. If you’d re-invested the dividends, you’d have more than that. And your cost of living would have only increased three and half times.

Journalism speaks to us because it shows us what is happening today. We extrapolate that these events will continue to happen in the distant future. You can see this, only in retrospect, as foolish. At the least, we can see they were expensive in the past.

What do you think will happen tomorrow? Next month? Next year? These are the wrong questions. You can see that now, because they are unknowable. In 1979, so much of the recent past and thus so much more of the recent future was glum, miserable, expensive and awful. No wonder the editors chose a dire Business Week cover photo—to sell magazines—and to appeal to our fear.

What do you think will happen over the next 30 or 40 years? This is the question. This question is important because even when inflation only increases our cost of living three or four times, we need our income to increase at a faster rate, so we don’t end up running out of money at worst, or living less than fulfilling lives.

“But,” you say, “I don’t have 30 or 40 years” and I say of course your money does have that long—because it will outlast you—because you’re working with a wealth manager at A&I Financial Services LLC, and you have a plan, and because you’re following it, at least a dollar will outlive you. This conversation, that’s the one you want to have.

This magazine cover, that’s the one you want to remember—forty years ago today, when equities died.

(1) With respect to Barry Ritholz, our source: https://ritholtz.com/1979/08/the-death-of-equities/

 

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