There Will be Blood is a 2007 movie starring Daniel Day-Lewis, based on Upton Sinclair’s book Oil! Mr. Sinclair published his book in 1927, and it dealt with the struggles of greed and fear in the early days of the oil industry in Southern California. I am sure that if Mr. Sinclair were writing his book today, 94 years later, the storyline would be similar.
The recent price increase in oil is one reason for the stock market’s volatility. Investors are concerned that rising oil prices will hurt stocks. Below is a comparison of a few significant increases in the price of oil and the S&P 500 since 1946.[1]
- From May 1973 to April 1980, the price of oil increased by 501%. The S&P fell 4.5%.
- From May 1986 to September 1990, the price of oil increased by 211%. The S&P climbed 37%.
- From June 1998 to May 2008, the price of oil increased by 576%. The S&P rose 29%.
- From February 2016 to February 2019, the price of oil increased by 87%. The S&P jumped 45%.
- From April 2020 to September 2021, the price of oil increased by 273%. The S&P soared 83%.
In these examples, the average increase for oil was 329%, while the S&P 500 rose 38%. Since 1973, oil has increased 241% or 2.5% per year. Inflation over the same period averaged 3.8% per year. The S&P 500, however, is up more than 4,000% – averaging 8.2% per year.
What to do today? I recommend focusing on a long-term time horizon and investing in a balanced portfolio of low-cost index funds based on your financial goals.
Follow your plan, think long-term, diversify your assets, invest often, rebalance your accounts, and good things will happen.
As a reminder, the stock market has always recovered. It might take one week, one month, or one year but it has always bounced back. If you need evidence, please look at the following years: 1907, 1915, 1929, 1930, 1931, 1932, 1934, 1937, 1939, 1940, 1941, 1946, 1953, 1957, 1962, 1966, 1969, 1973, 1974, 1977, 1981, 1990, 2000, 2001, 2002, 2008, 2018, and 2020.
Therefore, do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own. ~ Matthew 6:34.
October 6, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management 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 so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.
[1] https://www.macrotrends.net/1369/crude-oil-price-history-chart