Fear has dominated market behaviour

Six years after 9/11 and in the middle of a meltdown surrounding sub-prime loans in the U.S. that may lead to a recession, history has taught us that the stock markets – and our investments – are susceptible to some rather severe beatings.

In fact, there hasn’t been a year gone by since the Depression when world events have not rattled Wall Street and beyond.

When markets decline, fear is the one emotion that often takes over as people often avoid investments even though it’s a good time to buy.  Seasoned investors look for opportunities in volatile markets and seek to profit from oversold conditions.

But fear prevents most people from recognizing long-term buying opportunities which present themselves when markets dive.

Most are generally able to find an excuse for not investing.  But if hindsight is any indication, the financial markets have managed to survive some bruising world events, either made by man or nature.

We encourage investors to assess their time horizon, investment objectives and risk tolerance.  For investors with longer-term time horizons, declines in the markets may provide an opportunity to buy quality investments at lower prices.

Winston Churchill said it best to fellow Britons during the dark days of the Second Word War:  “If you are going through hell, keep going.”

The following list of stock market’s dark days will helpfully lend some perspective that the current situation is yet another bump in the road of investing:  Financial markets have managed to survive the following major events:

1929-30s – Depression 1974 – Nixon resigns
1939 – Second World War begins 1975 – U.S. withdrawal from Vietnam
1940 – France falls 1976 – New York City blackout/bankruptcy concerns
1941 – PearlHarbour 1977 – Energy crisis
1942 – Wartime price controls 1978 – Massacres in Cambodia
1943 – Industry mobilizes 1979 – Three Mile Island Disaster
1944 – Consumer good shortage 1980 – Abscam scandal rocks Congress
1945 – Post-war recession predicted 1981 -U.S. Pres. Ronald Reagan & Pope Jean Paul II shot
1946 – Dow tops 200, market “too high” 1982 – Worst recession in 40 years
1947 – Cold War begins 1983 – Soviets shoot down Korean airliner
1948 – Berlin blockade 1984 – Iran/Iraq war escalates
1949 – Soviets explode A-bomb 1985 – U.S. become a debtor nation
1950 – Korean War 1986 – Bombing in Libya
1951 – Excess profits tax 1987 – Record setting market decline
1952 – U.S. steel strike 1988 – Bank failures peak
1953 – Soviets explode H-bomb 1989 – Junk bond crisis
1954 – Dow tops 300, market “too high” 1990 – Iraq invades Kuwait
1955 – Eisenhower illness 1991 – U.S. recession, USSR dissolves
1956 – Suez crisis 1992 – Los Angeles riots
1957 – Soviets launch Sputnik 1993 – Great flood
1958 – Recession 1994 – Federal Reserve raises rates six times
1959 – Castro seizes power 1995 – Dow tops 4,000 then 5,000, market “too high”
1960 -Soviets down spy plane 1996 – Technology stock stumble
1961 – Berlin Wall erected 1997 – Asian financial crisis
1962 – Cuban missile crisis 1998 – Global economic turmoil
1963 – Kennedy assassinated 1999 – Fears of Y2K problem
1964 – Gulf of Tonkin, Vietnam 2000 – Internet “bubble” bursts
1965 – Civil rights marches 2001 – Terrorist attacks in U.S.
1966 – Vietnam war escalates 2002 – Worst bear market since ’29-32, Enron Tyco, Worlcom
1967 – Newark riots 2003 – War in Iraq, SARS
1968 – USS Pueblo seized, Korea 2004 – Madrid terrorist bombing, Asian tsunami
1969 – Money supply tightens, market falls 2005 – Terrorist attacks in London, hurricane Katrina
1970 – Cambodia invaded, war spreads 2006 – U.S. housing market declines, Iran nuclear program
1971 – Wage/price freeze 2007 – Subprime mortgage loans
1972 – Watergate  
1973 – Oil embargo