The Great Financial Crisis decimated investor confidence in the system at large.
With two recessions and two stock market crashes in the space of 10 years anything seemed possible.
The aftermath of the crisis created a new regime of pessimism. Everyone wanted their 15 minutes by trying to predict the next crash.
The Fed is going to cause hyperinflation and a collapse of the dollar! The next crisis will be even bigger! This is the top! No that’s the top!
I’m not naive to the fact that bad stuff can and will happen. Of course it will. But most of the time, dire forecasts about the future don’t come to fruition.
Let’s take a walk down financial memory lane and look at some of the worrying predictions of the past 15 years or so that didn’t come to pass.1
There was no double-dip recession following the 2008 financial crisis.
Stock market valuations did not surge back into bubble territory.
We weren’t in the early stages of a depression.
The Dow didn’t crash to 3,000.
The stock market did fall 19% in 2011. It was a great buying opportunity.
There was no recession in 2012.
2013 was not a dangerous year for stocks.
The stock market didn’t crash.
We didn’t get a repeat of 1937.
There wasn’t a stock market collapse in 2016.
We didn’t get another 1987 crash in 2017.
The stock market did fall 19% in 2018. It was a great buying opportunity.
We didn’t get a crash in 2019 or a flat-lining of the stock market.
The stock market did crash in March 2020 at the outset of the pandemic. It was a great buying opportunity.
The economy survived the coronavirus far better than expected.
The stock market and the economy didn’t stay down for long and the risk-reward set-up was pretty good.
We didn’t get hyperinflation.
The Fed didn’t cause an economic hurricane.
We did have a bear market in 2022. It was a great buying opportunity.
There was no recession in 2022 despite 9% inflation.
We didn’t get a recession in 2023 either.
The stock market did not crash 64%.
It did fall nearly 20% following Liberation Day and the trade war. It was a great buying opportunity.
There are going to be even more scary headlines in the years ahead warning about AI.
Look, I’m not trying to rub it in. Everyone gets things wrong about the markets and the economy. I’m wrong about a lot of stuff too.
I just think it’s important to recognize that sensational predictions rarely come true. Spending 95% of your time worrying about things that happen 5% of the time is a great way to constantly scare yourself out of markets that usually go up.
My stance on investing has always come from a place of reasonable optimism. There is no point in investing for the long haul if you do not think things will be better in the future than they are today. But you also have to recognize that bad things can and will happen along the way.
There will be nasty stock market crashes, recessions and financial crises in the future. I know these things will happen and I still invest for the long-term.
The entire reason I started this blog in the first place is that I was sick and tired of all the negativity coming out of 2008. I’ve spent the past 10+ years preaching about the virtues of long-term investing with the understanding that it’s not going to be a smooth ride.
I love this topic so much that I wrote an entire book about it. It comes out this spring. You can pre-order it now:
I’m really proud of this one. It’s essentially everything I’ve been working on for the past 10 years.
Further Reading:
Some Things I’ve Been Wrong About
1You can click each headline to read the articles.
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