It has been 45 years since BusinessWeek declared the “Death of Equities,” warning that rampant inflation was “destroying the stock market” and “to regard the death of equities as a near-permanent condition.”1 These dramatic prognostications haven’t subsided over time, likely because negative news is more appealing. When one news website decided to report exclusively good news for a day, it lost two-thirds of its readership.2 Our brains are hardwired to react more strongly to negative information.
As we begin a new year — and in this season of resolutions — why not focus less attention on the headlines? One reason is that negative news can skew our perceptions. An article in The Economist suggests that in recent years, opinions about the state of the economy have diverged from reality (see page 3). This has been termed a “vibecession,” where the prevailing mood is significantly more negative than the actual economic situation.
This may not come as a great surprise — our brains aren’t meant to handle the high volume of negative news we are fed today. Just two generations ago, most of our news was delivered by local television or newspaper. In the last 20 years, the internet made global news more ubiquitous. With the unveiling of the iPhone in 2007, news is now available at our fingertips 24/7; and in the last decade, social media has continued its proliferation.
From an investing perspective, negative news may create undue concern and sometimes compel investors to make hasty decisions. We all know the oft-counterproductive behaviours, such as trying to sell before a market downturn or, worse still, abandoning stocks during a downturn, which deprives the investor of the ability to eventually recover. While these appear to be intuitive actions in the face of uncertainty, they can derail the investing journey.
Today, there has been no shortage of negative news. Many are understandably struggling with an increasing cost of living and the impact of higher interest rates. Global economies remain highly indebted, economic conditions at home are softening and we’re still likely to see the lagging effects of the rate hikes. As advisors, we are focused on managing portfolios to navigate the challenges that come with the changing times.
However, it’s worth repeating: we’ve experienced these challenges, and many others, before. Recessions, financial crises, inflation, stagflation, even global conflict and war — the returns since the “Death of Equities” include all of these terrible things. And, yet, we’ve persevered and forged ahead. Consider that an investment of $100,000 in the S&P 500 Index during that period of maximum pessimism 45 years ago would have yielded around $8 million today. Decades later, in 2019, the publishers would sheepishly admit: “The S&P 500 return since its 1982 low has been 7,000 percent. Not bad for a corpse.”5 Yet, participating in this growth required having confidence that brighter days lay ahead.
As we begin another year, look forward to those brighter days ahead. We would like to take this opportunity to express our gratitude for entrusting us with your wealth management. Wishing you and your loved ones an abundance of health, happiness and prosperity in 2024.
