Geoffrey Chaucer, known as the Father of English literature, said: “Time and tide wait for no man.”
Inaugurations Give Us a Sense of History
Presidential inaugurations, for all their splendor, also provide an important opportunity to reflect on the passing of time. Has it really been more than eight years since then President-elect Obama remarked in Hyde Park that “we know the challenges that tomorrow will bring are the greatest of our lifetime—two wars, a planet in peril, the worst financial crisis in a century”? I watched that late-night speech as a first-time father hoping that my little girl would sleep through the night. That little girl is now in third grade. Time waits for no man.
Even today, it is harrowing to reflect on the state of the U.S. economy at that time: a 15% drop in industrial production, a 10% U-3 unemployment rate,1 a 20% U-6 unemployment rate,2 57 bank failures, and a 54% decline in the Dow Jones Industrial Average. It was this generation’s great financial crisis. Mercifully, lessons from crises of the past were learned and an appropriate mix of policy responses prevented the situation from deteriorating significantly further.
Each Period Provides an Excuse for Why Not to Invest
We often hear how the generation that lived through the Great Depression became financially conservative with a high propensity to save. It’s an unfortunate reality given that the U.S. stock market returned 9% per year in the 20 years after the Great Depression.
The same may one day be said of those who lived through the 2008 financial crisis. Consider that on the eve of the financial crisis, nearly two-thirds of American adults invested in the stock market. Now that number stands at a near-generational low of 55%. Today, more American households buy lottery tickets than invest in the equity market. The chance of winning the lottery is 1 in 292 million. In the words of Lloyd Christmas, “So you’re telling me there’s a chance.” On the other hand, the S&P 500 Index has historically reached a new high every 16 days, a feat the market accomplished 18 times in 2016.
Investors always invent reasons to not invest in the stock market. In the early days of the 2009 recovery it was the exaggerated fear of hyperinflation. Today we worry that the U.S. dollar is too strong. Back then investors worried that Planet Earth was running out of the commodities needed to sustain or grow the global economy. Today, we worry that the world is too awash in fossil fuels. In 2009, investors worried that China was growing too rapidly and would soon surpass the United States as the world’s leading economic power. Today we worry that Chinese growth is slowing too rapidly. With apologies to Alanis Morissette, “Isn’t it ironic…don’t you think?”
So on this Inauguration Day we celebrate our democracy, reflect on how far we have come over the past eight years, and look to the future with hope. A hope that free people living under a rule of law will consistently improve their lots in life and that financial markets will reflect this improving human condition. We look to the future with the hope that Americans will repurpose the annual $300 they spend per household on lottery tickets—and invest in the equity market. If every household since 1964—when lotteries became legal in the United States—had instead taken that amount each year and invested it in the equity markets, they would now have $116,943 (Exhibit 1)!
With the lottery, all you need is a dollar and a dream. With equities, all you need is a dollar—and a consistent investment plan. The tide waits for no man.
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1The official unemployment rate, which occurs when people are without jobs and they have actively looked for work within the past four weeks.
2The unemployment rate that occurs when part-time workers who want to work full-time, but cannot due to economic reasons.
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These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.