Broker Check

American Resilience

March 16, 2018

Every once in a while I come across a graph or chart that tells a powerful story about the markets. Here's one that I think fits the bill:

The above image is from J.P. Morgan’s “Guide to the Markets” research and market insights. Literally, it shows the movements of the S&P 500 index since 1900. Figuratively, it symbolizes a lot more. 

A lot has changed since Standard & Poor’s formally introduced its US stock market index in 1923. In the 1920’s, 90 stocks made up the S&P’s Composite Index. It wasn’t until 1957 that the index expanded to the likes of 500 American-based companies which we see today.

So what are the takeaways? For starters, that the US stock market is resilient and grinds higher over the long-term, despite a whole lot of chaos along the way. Secondly, and more symbolically, this concept of resilience applies not only to the market but to the American people as well.

Despite natural disasters, world wars, bitter political conflicts at home and abroad, periods of devastating unemployment and/or sky-high inflation, major recessions, and most recently the global financial crisis, the people that make this engine go have never given up. Entrepreneurs in our country haven’t halted their ambition despite failures or setbacks, workers haven’t called it quits despite poor wages or lack of desired opportunities, and businesses as a whole have never stopped innovating, growing, and helping our economy not only survive but thrive in an increasingly global economy.

As a result, the potential to share in strong corporate earnings has driven investment dollars into the companies that comprise the S&P 500, which has grown over time and remained competetitve against international markets. This point is further illustrated in the graph below (the S&P 500 in gray and international markets in purple):

Nothing against the international markets - many have done well over time and play an important role in a diversified portfolio. But few have shown the innovation and consistent resilience like the markets here at home. And that says a lot about the American people.




The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Stock investing involves risk including loss of principal.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The MSCI All Country World Index (ACWI) is a market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. The MSCI ACWI is maintained by Morgan Stanley Capital International (MSCI), and is comprised of stocks from both developed and emerging markets.