Understand That Crises Are Inevitable



History has taught that investors in stocks will always encounter crises and uncertainty, yet the market has continued to grow over the long term.

The chart below highlights the myriad crises that faced investors over the past four decades, along with the performance of the S&P 500® Index over the same time period.

  • Investors in the 1970s were faced with stagflation, rising energy prices and a stock market that plummeted 44% in two years.
  • Investors in the 1980s dealt with the collapse of the major Wall Street investment bank Drexel Burnham Lambert and Black Monday, when the market crashed over 20% in one day.
  • In the 1990s, investors had to weather the S&L Crisis, the failure and ultimate bailout of hedge fund Long Term Capital Management and the Asian financial crises.
  • Investors in the beginning of the 2000s experienced the bursting of the technology and telecom bubble, 9/11 and the advent of two wars.
  • Today, investors are faced with the collapse of residential real estate prices, economic uncertainty and a turmoil in the financial services industry.

Through all these crises, the long-term upward progress of the stock market has not been derailed.

Investors who bear in mind that the market has grown despite crises and uncertainty may be less likely to overreact when faced with these events, more likely to avoid making drastic changes to their investment plans and better positioned to benefit from the long-term growth potential of equities.


Despite Decades of Uncertainty, the Historical Trend
of the Stock Market Has Been Positive

Source: Yahoo Finance. Graph represents the S&P 500® Index from January 1, 1970 through December 31, 2009. Investments cannot be made directly in an index. Past performance is not a guarantee of future results.



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The chart in this report is used to illustrate specific points. No graph, chart, formula or other device can, by itself, guide an investor as to what securities should be bought or sold or when to buy or sell them. Although the facts in this report have been obtained from and are based on sources we believe to be reliable, we do not guarantee their accuracy, and such information is subject to change without notice.

The S&P 500® Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends, weighted towards stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. Investments cannot be made directly in an index.

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