I’m More Scared of Investing Than Dying
I’m more scared of investing than dying…
If there was any doubt that it’s summer on Wall Street, it was removed by last week’s market “action.” Each of the three major market indicators closed the week just about unchanged from the Friday before, still close to their all-time highs. (1)
Then there’s the fact that we’ll have the month-end on Wednesday, along with the latest Fed pronouncements. And then on Friday, we’ll get the non-farm payrolls data so the traders played it close to the vest. Perhaps we’ll see a bit more activity in the coming week.
About the headline
For the record, that’s definitely not about me.
It’s not an understatement to say that I put out a rather loud “what?” when I read the source of this on Friday. Here’s the story.
According to a new Nationwide Financial survey of potential investors with at least $100,000 in investible assets, “83% fear another financial crisis and 62% are scared of investing in the stock market. The only common fear that evokes similar distress is skydiving (81%). That’s more than the 58% who fear death and the 57% who fear public speaking.” Mr. Michael Spangler, president of Nationwide Funds, understatedly (in my opinion) said, “We were pretty surprised that people are more afraid of investing than public speaking and dying.” He added that, “There doesn’t seem to be much understanding of the recovery. There was a double digit return on the equity markets in 2012.” And, for the record, we’re doing the same so far this year.
This survey was aimed at folks with some significant money to invest, making it all the more confusing to me. Pretty surprised? I’m way past pretty surprised. Matter of fact, I flew by extremely and am approaching terminally.
In the Marine Corps, there’s a phrase that says, “there’s always the 10% who don’t get the word.” Basically, it means that somebody is always not aware of what’s going on. Based on these percentages, it would seem that I’m the one who doesn’t get it. After all, I’m a guy not concerned about another foreseeable financial crisis who speaks daily in and to the public about the benefit of investing. (Not while skydiving, however…)
Why you shouldn’t be in the 83 or 62 group
I’m going to bring Sam Stovall, the S&P Capital IQ Chief Equity Strategist, and the King of Wall Street historical market movements, in for some help with the bigger picture.
Sam issued a note on the 22nd in which he said, “During the past few weeks, the financial media has constantly reminded investors that the S&P 500 has recorded successive all-time closing highs. They also make it sound as if we should enjoy these days while they last, for this bull market is therefore likely to end in the very near future. I don’t know why they say that, other than to instill fear and thereby ensure that investors stay tuned.” I definitely agree.
He added that, “history would indicate, but not guarantee, that this bull market has many more new-highs to record before finally running out of steam. Buy-and-hold investors should prepare to hold on tight and don’t let your emotions get in the way of maintaining an appropriate asset allocation. However, for those willing to trade short-term swings in equity prices, another opportunity may just be around the corner.”
In his note, Sam went back over the 11 bull markets since 1949. He concluded that there’s no reason to panic. History shows that new highs are typical in a maturing bull market. He said that each of the bull markets lasted an average 57 months; we’re 52 months into this one.
(The operative term here is average. Though seemingly forgotten by investors and the media, “all the way back” to the days of the bull market of 1985 through 1999, the market was up every single year –except for 1990 when we were down by 4.3%.
Here to add additional credibility is Dr. Ed Yardeni, long-time, highly-respected market strategist. He had a comment out on the 24th that I think reinforces a positive longer-term view. He said that, according to his studies, “S&P500 forward earnings are at a record high. Forward earnings is an excellent 12-month leading indicator of actual earnings when the economy is growing. However, it doesn’t provide any advance warnings of recessions. If you agree with me that a recession is unlikely over the next 12-24 months, (I do, Doc) then the record high in forward earnings is a good omen for profits, the economy and stock prices.”
That’s all good for the near-term, the 83/62 crowd says. What about the bigger picture?
Let’s take a swath of time that many of you can get your mental timelines around.
Consider a span which included extremes in both interest rate and stock market movements, that from 1975 through 2012. During the period, rates on the 3-month US Treasury bill ranged from a high of 10.47% down to 0.01%. (2) The Dow closed at 875 at year-end in 1975. (3) It was over 13,000 at the end of last year. (4) And, there were all kinds of terrible events all around the world, personal and financial alike.
Nonetheless, from 1975 through 2012, the market – as measured by the S&P500 –has had only 10 down years in 37. (5) Said differently, 73% of that time – the results were positive. Sure, there’s no guarantee such a widely positive spread will be repeated. However, I think the results demonstrate that having been –and stayed– invested in the stock market has proven to be generally positive.
I hope to have helped reduce your investing anxiety level about investing somewhat with these comments…at least to where it’s a lot lower than a fear of dying.
- CNBC, 26 July 2013
- St. Louis Federal Reserve
- CBS News, 31 Dec 2013
- CNBC, 31 Dec 2013
- S&P/Dow Jones
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