When you see an NPR headline like this one (“Dow Suffers Record-Breaking Christmas Eve Losses”) and the you see a follow up headline a couple days later like this one (“After Big Losses, Markets Stage a Post-Christmas Rally”), it’s very easy to be reminded of an earlier time.
That first article actually went so far as to compare the lost ground to periods of severe market unrest, such as 2008 and 1931. And to be fair – they’re not wrong. These have been some pretty terrifying moments for people with money invested in the stock market. Worse yet – the headlines are also shockingly familiar. In 1929 on the day that lives in infamy among Depression historians, the Boston Globe’s headline on the stock market? “Wild Disorder as Stocks Drop”. A few days later? “Big Crash and Rally in Stocks”.
The word “rally” always feels like a signal to me. There is a concerted effort made to make everything okay. Not to let the dropping stocks be the end of the story. As we know today, bad news can severely hamper the ability of the market to improve. And yes, it’s been awhile since we’ve had extremely headline sensitive markets. But here we are, and we have that sensitivity back. Watch how the news does what it can to make the bad news seem like it could only get better from here.
Now, I would like to pause right here for a moment to say this: It is very easy to compare what is happening today with history. We also have to learn from that history as well. There is a reason that they use optimistic language. If there is a run, it will actually make things worse. So don’t take the historical comparison and use it to fear monger. Just keep in mind – things might get a bit rough. Seems a bit crazy, but if you can hold out, do. And don’t put all your money in one place either. There’s some fairly good financial advice out there if you’re worried (like here).
And if you’re really worried – keep in mind that this is nothing new. Yes, the stock market crashed in 1929 leading to a few years of financial desparation for most of the world. But rocky markets come around and will come around again. They did several times in the 1700s (you need look no further than the South Sea Bubble, or the Boston Tea Party for examples). Poor luck (and good luck) with investing is also at the center of many of Charles Dickens’ work – which tells you the state of the world in the 1800s. And for a more recent popular culture reference, simply look to the start of Season 3 of Downton Abbey and the poor luck that Lord Grantham had. The key is to be smart with your investing choices. There really is nothing new under the sun.