From November 11, 1974 to November 20, 1974 the S&P 500 fell 9.6%. It dropped because of economic uncertainty and political unrest.

Let’s explore the major themes from 1974.

In August 1974 President Richard Milhous Nixon resigned. He was the first, and only, U.S. President to resign. His resignation was a result of the Watergate scandal.

Because of Nixon’s resignation and the Watergate scandal, Democrats made substantial strides in taking control of Congress and the Senate.[1]

The New York Times published an article accusing the Central Intelligence Agency of spying on U.S. citizens.[2]

Interest rates were soaring. The yield on the U.S. Treasury 10-Year Note rose 43.5% from March 1971 to September 1974. It would peak in 1981 with a yield of 15.84%.

The current yield on the 10-Year is 3.22%. If it followed the same path as it did in the late ‘70s and early ‘80s, it would rise to 3.94%, well below its historical average.

As I mentioned, the S&P 500 fell 9.6% in November 1974, falling from 75.15 to 67.9. Investors who panicked and sold their stock holdings during this rout missed out on enormous future gains.

From November 1974 to October 2018, the S&P rose 4,088%! During its 44-year run, it produced an average annual return of 8.86%.[3]

Today, the themes are similar. We currently have political unrest and rising interest rates. The market is positive for the year, but it has experienced some short-term turbulence. Don’t let the uncertainty derail your long-term plans. Follow your financial plan, stay diversified, and invest for the long haul.

What has been will be again, what has been done will be done again; there is nothing new under the sun. ~ Ecclesiastes 1:9

10/5/18

Bill Parrott is the President and CEO of Parrott Wealth Management firm located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog.

 

 

[1] http://history.house.gov/Congressional-Overview/Profiles/93rd/

[2] https://www.nytimes.com/1974/12/22/archives/huge-cia-operation-reported-in-u-s-against-antiwar-forces-other.html

[3] Yahoo! Finance