105 Years Ago In Investing: Conditions Were Much The Same As Today

Published Friday, October 14, 2022 at: 7:59 PM EDT

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The post Covid-19 era has triggered an annual inflation rate of +8.2%. High inflation has forced the Federal Reserve to hike interest rates sharply in recent months to slow economic activity.  Since closing at an all-time high on January 3, the Standard & Poor’s 500 stock index has plunged in value by -25.3%. Amid the decline in stocks, as the economy hurtles toward recession, here’s important historical perspective.   

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Economic problems today are very similar to the situation investors faced 105 years ago. 

During World War I, the United States economy flourished. Initially, the U.S. was a neutral party in WWI and exported goods to both sides, sparking growth that ignited a 7.7% 12-month inflation rate in 1916, and a blazing surge to 17.8% in 1917. In 1918, Spanish Influenza extended the inflation problem into 1919 and 1920. 

But the nation got through it. One big difference between then and now, however, is that the Federal Reserve learned from mistakes made after WWI and the Great Inflation of 1965 to 1982. Point is, the U.S. has gotten through inflation problems worse than the post-Covid inflation underway now. 

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The Standard & Poor’s 500 stock index closed this Friday at 3,583.07. That was -2.37% lower than Thursday’s close and -1.6% lower than week ago. After a bad week for stocks, remember that the Spanish Influenza and WWI did not stop the U.S. stock market from growing over the past century. The stock index was up +60.1% from the March 23, 2020, bear market low.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.   ​​​​​​​​


Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.

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