Riding the Market Rollercoaster Part 3

Personal Money Planning |

By Gary Silverman, CFP®

For the last two weeks I’ve been expounding on (mostly warning about) my recommendation for folks who realistically shouldn’t have been in the stock market. Today I want to shift and talk about just how different things are now compared to just about any time in history.

(Insert cricket chirping sound.)

I exaggerate. Of course, things are different now. Every second of every day things are different. But when it comes to investing the saying, “The more things change the more they stay the same” applies here. “But you don’t understand, Gary, we’re in a bear market and probably heading to a recession!”

Okay. I’m not too concerned. Bear markets happen every five to seven years. So, on average, we get about two bear markets a decade. These things are not rare. Far from it.

But what about recessions? They don’t happen too often, do they? True, they don’t happen near as often as recessions. Last century we had 12 of them, or a bit more than one every decade. This century we’ve had three in 22 years. While not as common as bear markets, recessions aren’t rare either.

“Maybe, but the inflation we are seeing is certainly unprecedented!” Well, yes, if you’re not yet middle-aged for indeed this is the highest inflation we’ve seen since 1982—40 years ago (we came close in 1990, but close doesn’t cut it). If you want to know about bad inflation, look at 1973 through 1981. Across those nine years, four were double-digit (1979 was 13.3%) and only one was below 6%. Before that we had 18.1% and 8.8% in 1946-47; and 9.9% and 9% in 1941-42. In the less than 100 years we’ve had 12 of them with inflation higher than what we saw last year.

So no, the inflation we are seeing is not unprecedented. And while not as regular a phenomenon as recessions, it does happen. If anything, the story isn’t how high inflation has been lately, but how low it was in the previous three decades.

“Why then, if all of this happens so regularly, do I hear from multiple pundits that things are indeed unprecedented?” I hazard to guess it’s because “everything is pretty normal” is not a great lead-in to a news story, op-ed, or Facebook post.

“But this sure seems different than it was before!” I’ll again admit that things are never exactly the same, but the main reason it seems that it’s worse than it’s been is because you are not hearing about it from your grandparents or reading it in history books—you are living it. And though you may have been through similar times in your own life, this one is fresh; time and context haven’t had a chance to soothe the rawness you feel.

May Ukraine stay free.