105 Years Ago In Investing: Conditions Were Much The Same As Today
Published Friday, October 14, 2022 at: 7:59 PM EDT
The post Covid-19 era has triggered an annual inflation rate of +8.2%. High inflation has forced the Federal Reserve to hike interest rates sharply in recent months to slow economic activity. Since closing at an all-time high on January 3, the Standard & Poor’s 500 stock index has plunged in value by -25.3%. Amid the decline in stocks, as the economy hurtles toward recession, here’s important historical perspective.
Economic problems today are very similar to the situation investors faced 105 years ago.
During World War I, the United States economy flourished. Initially, the U.S. was a neutral party in WWI and exported goods to both sides, sparking growth that ignited a 7.7% 12-month inflation rate in 1916, and a blazing surge to 17.8% in 1917. In 1918, Spanish Influenza extended the inflation problem into 1919 and 1920.
But the nation got through it. One big difference between then and now, however, is that the Federal Reserve learned from mistakes made after WWI and the Great Inflation of 1965 to 1982. Point is, the U.S. has gotten through inflation problems worse than the post-Covid inflation underway now.
The Standard & Poor’s 500 stock index closed this Friday at 3,583.07. That was -2.37% lower than Thursday’s close and -1.6% lower than week ago. After a bad week for stocks, remember that the Spanish Influenza and WWI did not stop the U.S. stock market from growing over the past century. The stock index was up +60.1% from the March 23, 2020, bear market low.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.
- Where The Boom No One Expected Gets Its Legs
- Latest On Inflation, Consumer & Business-Owner Optimism
- Slower Growth But Economic Outlook Remains Bright
- Labor Market And Inflation Drove Stocks Higher
- Costlier Homes Expected To Appreciate 4% Annually For The Next Five Years
- Leading Economic Index Falls For 16th Straight Month
- Tax-Sensitive Investment Planning In 2023
- A Healthy Recipe For Growth Is Simmering
- Good News About The U.S. Economy
- The New Bull Market Has Broadened
- An Economy Goldilocks Would Definitely Live With
- Monthly Pace Of New-Job Creation Slowed In June, Which Is Good News
- Standard & Poor's 500 Gained 9.9% In Q2 2023
- This Week’s News For Investors
- This Week’s News For Investors Is Very Good
- Why The New Bull Market Theory Was In The News This Past Week
- Strong Jobs Report Caps A Week For The Record Books
- Why Stocks Rose Friday Despite A Rise In Inflation In April
- Weekly Investor Update
- The Confluence Of Bad News For Recent Retirees And Those About To Retire
- Good And Bad News This Week For Investors
- Getting There: The Economic Balancing Act Progressed In March
- Stocks Gained Friday But Closed Fractionally Lower For The Week
- Good News On Inflation But A Recession May Be Hard To Avoid