Investing, Inflation, and Politics…Oh My!!

By Private Vista on August 12, 2021

It’s been nearly 10 years since we’ve seen inflation top 2.5%, which is causing investors some concern as to the effect it will have on their portfolios. Additionally, the increased rhetoric coming from Washington about an increase in taxes is causing investors to freeze with uncertainty. While this may feel unprecedented, we have seen this before in different forms and continue to encourage our clients to have a long-term view. Here are some interesting market statistics that provide some insight as to how the market has performed in these environments:

 

Investing and Inflation

  • In the last 70 years (1951-2020), inflation has been at least above 5% in 12 different years, most recently in 1990.  The S&P 500 has been equally split over the 12 high-inflation years, advancing in 6 years and falling in 6 years (on a total return basis).  The average return for the S&P 500 over all 12 years is a gain of just +3.2% (total return)
  • Inflation, using the “Consumer Price Index” as the measurement, was up +9.0% in 1978, up +13.3% in 1979, followed by +12.5% in 1980, and up +8.9% in 1981

 

Long Term Investing

  • After peaking on 3/24/00, the S&P 500 index fell 47%, then gained +121%, then lost 55%, then gained +529%, then lost 34%, and finally has gained +94% through the close of trading as of 6/11/21.  An investor who rode out all 3 “bear/bull” cycles since 3/24/00 would have gained an annualized +7.0% per year over the entire 21+ years (total return) in spite of initially investing at an all-time high on 3/24/00.
  • The S&P 500 has set 180 all-time record closing highs in the last 5 years, i.e., since 6/07/16, an average of 3 record closes per month.

 

Investing and Politics

  • In the last 60 years (1961-2020), the S&P 500 has been up +17.5% per year (total return) under a Democratic President and a Republican-led Congress, nearly 4 times the +4.5% annual return achieved under a Republican President and a Congress controlled by the Democrats.  The stock index gained +11.8% per year when the White House and Congress were controlled by the same political party, as is the present situation in Washington in 2021.  When the House and the Senate were controlled by different parties (regardless of which party is in the White House), the S&P 500 has been up +11.3% per year.

 

There always seems to be something going on that causes investors to be concerned about the markets. Yet the statistics continue to show that steady, long-term investing can be beneficial regardless of the current environment. If you’d like to be added to our weekly “By The Number’s” e-mail, please e-mail us at RPorzel@myprivatevista.com.

 


Article By: Randy Porzel, CFP®, RICP®Randy is a Partner and Lead Advisor at Private Vista LLC. He began his financial planning career as an intern and worked his way up through every job at the firm. Randy finds joy in taking clients through Private Vista’s planning process, using tools that answer questions and clear uncertainty so that clients can look forward to their idea of an enriched life. In his free time, Randy enjoys serving on the boards for the Chicago Lighthouse for the Blind and The Darien Lions Club, whose mission is to serve those in the community with visual impairments.


 

Source: By The Numbers; written and copyrighted by Michael A. Higley

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Hightower Advisors, LLC is an SEC registered investment adviser. Securities are offered through Hightower Securities, LLC member FINRA and SIPC. Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.

 


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